Not Quite Ready to Stop Working?
For many retired execs, consulting is the perfect way station

Many retiring executives have trouble winding down. They pack their days with activity but soon discover that being busy isn't as satisfying as being productive: Retirement has left a gap in their lives. For these Type As, consulting may be the answer. The job market has tightened, and as the oldest Baby Boomers begin to retire there is new demand for experienced workers. Lots of opportunities exist for retiree consultants who want to work at their own pace, take only the most appealing jobs, and give clients the kind of frank assessments that were unimaginable when they worked on staff. Not to mention make a few bucks--in some cases, quite a lot of bucks. ''I would think a senior executive out of a [large] company would make $250,000 without breaking a sweat--and that is only working part-time,'' says Jerald Savin, chairman of the Institute of Management Consultants.

Take Harry Jacobs. In 1997, after 20 years of building Richmond (Va.) advertising firm Martin Agency into a powerhouse with $400 million in billings, Jacobs retired at age 68. He planned an idyllic life of golfing, fishing, painting abstracts, building scale models, volunteering, and playing with his grandchildren. It didn't turn out to be the Norman Rockwell scene he had imagined. ''To be perfectly honest, it's an awful transition--in my case, almost brutal. I am the classic case of the retiree who worked 40 years, loving all of it.'' No one was knocking on his office door seeking advice. ''You lose some of your self-esteem,'' he says.

Within months, Jacobs was back to work--this time as a consultant. ''Consulting is a good way to continue at your own cadence without a lot of grief,'' he says.

Yet would-be retiree consultants may find that they need to polish up neglected skills, such as typing, or learn new skills, such as managing an e-mail account, before they are ready for prime time. And they'll have to get used to the idea that, as consultants, they can't give orders. ''I'm used to making things happen,'' says Robert Potter, 67, of Irving, Tex., who retired as CEO of Datapoint, a computer-networking company, in 1990 and has been a consultant ever since. Because he can only advise, he says, ''I don't get the satisfaction, the reward, the completion feeling.''

Others may find it difficult to market themselves. ''The phone doesn't ring if you don't make it ring,'' says Savin. You can land assignments through your old career contacts, by attending conferences, and by making presentations at conferences. Getting published in a trade journal is an attention-getter.

There are also agencies that match retirees and temporary assignments, such as IMCOR in Stamford, Conn., or New York's Executive Interim Management. For very top executives, assignments are not industry-specific but call on skills that cross industry groups. ''At the top level, you see the same four or five issues, and these guys have seen these issues,'' says Roger Sweeney, managing director of Executive Interim Management. Larry Frost, 58, who signed with EIM after retiring as chief executive at aluminum manufacturer Alumax after a 25-year career, was called in to turn around a $100 million steel-distribution company in Pennsylvania and then a California medical-equipment manufacturer. And he still manages to average more than 1,500 miles of bicycling a year.

One advantage to being an interim executive is that, unlike being a consultant, an interim manager has the power to execute, says Frost. ''We will not take an assignment unless we have complete authority, and that has worked very, very well,'' he reports. EIM charges clients $2,000 to $6,000 a day, based on the complexity of the job. The firm says the interim exec gets the bulk of that.

Not all consultants rake in those high fees, but second-career earnings do raise some financial questions. Fortunately, the rules on Social Security were loosened this year, so people over 65 no longer have their benefits lowered if their income exceeds a threshold. A bigger issue is how to shelter income with a retirement-savings program. A Keough plan lets consultants shelter about $30,000 a year. The contribution methods that allow you to shelter the most require you to pay in each year whether you take a salary or not. You may be expected to offer the Keough to any employee, and when an account hits $100,000, it requires extra tax filings.

Even more can be put aside with a defined-benefits plan, but that requires an actuary to set up and administer, which can cost thousands of dollars. ''For someone who is consulting for a few years, it may not make sense,'' says Scott Kahan, a certified financial planner in New York. A Simplified Employee Pension Plan (SEPP) is the easiest, but you can shelter only $10,800. All of the plans are tax-deductible and tax-deferred and can be rolled into an IRA. Some consultants may want to consider incorporating as a Subchapter S corporation, which distributes both salary and profits to its members. The profit portion is free of Social Security taxes. ''Some people take 100% as profit and zero in salary. That's very aggressive, and the IRS can come in and hit you with taxes,'' warns Kahan.

Also, don't forget to get a tax break on your office. The pitfall to deducting a home office is that when the house is sold, some of the profit may be considered a business gain and be taxed. However, says Kahan: ''If a person quits and keeps the house a few more years, it's usually not a problem.''

DON'T TAKE TESTS. How much should consultants charge? Whatever the going rate is. Go by what you used to pay when you were on the other side. Or survey what other consultants charge. Some consultants have forgone fees for equity in small companies, but experienced consultants recommend against it. Most of all, warns consultant Potter, don't fall for companies that ask for a free ''test project'' with the promise of paying work to follow.

Few retiree consultants plan to work until they drop. But consulting can combine leisure with labor in a way the corporate world doesn't. ''It may take a while to get to the point where I can enjoy retirement, but it is critical for anyone to get there,'' says Jacobs, the retired ad exec. Meantime, consulting lets him work the same way he plans to retire--at his own speed and on his own terms.


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