The Simple Dollar recently offered up a post on retirement planning for a low-income career, aimed at people like some of his friends who have “made the financially difficult choice to follow their heart” into careers that are very fulfilling, much needed and, perhaps consequently, low-paying.
The advice he offers, in broad strokes, is (a) automatic investment in a Roth IRA, even if it's only $20 per week; (b) take comfort in the fact that you'll figure out how to live on low income; (c) not to let pride stand in the way of someone wanting genuinely to help you.
To be fair, check out the article, but overall the theme seems to be one of accepting the fact that this means poverty for the rest of your life, so embrace it, handouts and all. Or, more succinctly, throw in the towel.
I really hope that people in social work, missionary work, and other low-income careers fight harder than this for their financial prospects. (I mention people and social work and missionaries because he did.) There is almost no reason why someone should have to depend on the (meager) savings from a low-income job, Social Security (what there is of it), and the kindness of strangers, when they have 20-30 years to plan.
These people (those in social work, missionaries) do what they do because they are called to it. Over a lifetime, pursuing a calling is far more important than just doing a job. (My calling is music.) But when the rubber meets the road, putting food on the table, buying clothes, taking care of health needs, and providing for the time that bringing in an income isn't possible anymore is more immediate, and can postpone – perhaps forever – pursuit of that calling.
Calling and occupation are not necessarily the same thing. It's fantastic if they are, but in many cases they're not, and even if they are, occupations that are long on calling are often short on pay, as social workers and missionaries find out.
Aside from the meaning of the job to the job-holder, a low-paying job is a low-paying job. Working at a low-paying job for one's career has predictable results: financially uncertain retirement years. Hinging one's retirement years on income from a low-paying job, thrift, and the kindness of strangers is risky, and largely unnecessary. I'd go so far as to say this: If someone does hinge their retirement years on these things, it's their own fault.
The key ingredient is this: What is done after the workday is done? It's what's done in one's “free time” that makes the difference. (Time isn't free. That's why it's in quotes.) Ten to twenty hours a week, fifty weeks a year, over 20 years, is 10,000 to 20,000 hours. I know other bloggers that, after starting up their blogs about the same time I have only five years ago, have already quit their jobs to write, or who have exceeded their (rather princely) incomes, working only part time. And that's just in five years. Imagine what could happen over 20 or 30 years, or how much more likely success will be after trying a few times.
Depending on Vanguard for your retirement is risky and foolish. Depending on the kindness of strangers is risky and foolish. Start a side business (or a few) and build it over time so that it can support your calling, whatever it is. Don't throw in the towel and resign yourself to a life of poverty for the rest of your life, please!
Thanks to The Financial Blogger for including this post in the Carnival of Personal Finance.
Well said. My second son was a psych major who works in social services for a non-profit. He does great work but makes very little money. He is now working on developing a personal side business to compensate. I am proud of him.
It was dumb junk like that that caused me to stop reading The Simple Dollar in June of 2008. Haven’t missed it a bit.
I think Trent’s article would have been much better if he had included your advice here, MBH. Just because you don’t earn much at your “regular” job doesn’t mean you’re doomed to never make much money. If your income from your job doesn’t cut it, then do something about it rather than resigning yourself to poverty.
I agree! These are worthy professions, but if a person cannot make a living doing it or cannot save for retirement, the “calling” needs to take a back burner (or at least sit on the side) while a “profession” that will provide those things is sought out.
You make great points but no everyone is destined or has the skillset to be a business owner.
Even so remaining poor is still a decision. MSN had a great story of a guy that grew wealth on 20K/year. http://articles.moneycentral.msn.com/Investing/StartInvesting/GettingRichOnA20000DollarSalary.aspx
It’s not what you make it’s what you keep!
One of the commenters at Trent’s site remarked that a social worker’s job is so all-consuming that no time is left to build side-stream income. The example that was given certainly made it sound as though writing a blog or working a second job would be out of the question.
Some vocations (in the sense of “calling”) do consume all of the devotee’s life. If that’s what you have to do to feel right about yourself, then that’s just what you have to do…and maybe part of it is, in effect, taking a vow of poverty. For myself, I wouldn’t want to face the outcome in old age, and so I would put off the good works until after I’d built some degree of financial independence with a 20-year career. However, some people feel God provides. And maybe She does.
As for those of us who have no entrepreneurial bent, it doesn’t take a Steve Jobs to organize a yard sale. My neighbors used to collect junk — often bought cheap at thrift shops, other yard sales, and even collected from dumpster-diving — and about every three months they’d throw a monster yard sale. They’d collect several hundred dollars every time. Not exactly a business, but it raked in a fair amount of under-the-table cash, which could be used to buy groceries while the grocery budget in their visible, taxed income from the Vocation went into a Roth.