When it comes to making money, Black women are among the most creative people I know.
We embraced the side hustle long before it was a thing, whether we were selling our sweet potato pies after church, hosting lingerie parties or planning trips for our family and friends. So when I recently started hearing financial professionals talk up the idea of 'pretirement' as a way to extend our earning power as we age, I couldn't help but think that, as a group, we have the ambition and know-how to make it work in our favor.
Pretirement is a relatively new term coined to describe the period in our lives between working our day job and giving up work entirely to live a life of leisure. For more and more Americans, the idea of retirement as this period of sitting on the porch gazing into the sunset has given way to the idea of a 'second act,' an opportunity to earn money doing something enjoyable – or at least more tolerable and less time-consuming – than our nine to fives.
That could mean working part-time, starting a non-profit, consulting, exploring a side hustle or something that has yet to be defined. For myself, I'm envisioning a life where I'm pursuing a mix of travel-writing projects and occasional ghostwriting work – enough to keep my pockets lined without limiting my freedom to explore the world.
In 2022, 13 percent of retirees said they had done some work for pay in the previous month – 10 percent had a part-time gig and 3 percent were working full-time, according to the Federal Reserve. That number could rise substantially, as nearly 3 in 4 workers plan to engage in some work during retirement, according to the 2023 Employee Benefit Research Institute /Greenwald Research Retirement Confidence Survey.
But not all retirees are choosing to work out of necessity. Nearly half – 45 percent – said they worked in retirement for the social or emotional benefits that come with maintaining an active and engaged life, according to a recent study by T. Rowe Price. One of my cousins 'retired' and started planning events for people with her newfound time. She's always loved organizing social events and her motivation was getting out and connecting with people, but the money she's making is giving her a bigger retirement budget to spend.
Finally there's this reality: We're living longer than previous generations. Last year, the National Institutes of Health reported that between 2000 and 2019, life expectancy increased more for Black Americans than for other races. Not only do we need money to continue to be active and live our best lives, but for many of us, our nest eggs will have to last for more years than previous generations needed to plan for.
How to get ready for pretirement
Whether you plan to quit your day job and launch into pretirement at 45 or 70, the time to prepare is now, experts say. Dreaming up a plan for those years can set you on a path to thrive in pretirement, says Jamila Souffrant, author of the upcoming book, Your Journey To Financial Freedom: A Step-by-Step Guide to Achieving Wealth and Happiness. The key is setting ourselves up so that we can waltz into pretirement with some control over our finances so that we can choose how we supplement our incomes during those years. Here are some things to things to think about:
Strive to become debt-free. Debt can act as a chain, keeping us tied to a job we hate or a life of financial struggle. “Prioritize paying off high-interest debts before pretirement,” Souffrant advises. Think credit cards and car notes. "Being debt-free or having minimal debt will reduce your financial stress and allow you to allocate more resources to investments and passive income sources."
Take stock of your expected sources of income. Your income during pretirement and retirement can come from a number of places, including Social Security, retirement plans, pensions and current earnings. Once you have an idea of what will be coming in, you'll have a better understanding of what you need to earn during pretirement.
Assess your skills, strengths and interests. One of the differences between pretirement and working your traditional 9 to 5 is that in pretirement, working is more on your terms. You don't want to wake up on Monday morning with that feeling of dread thinking about the week ahead. What strengths and skills from your current job will people pay a premium for in retirement? Also, what type of work would you want to do? "Leverage the skills you’ve homed in on and have from your current job," Souffrant says. If you need to strengthen a few skills with a class or some training, do it now.
Identify opportunities that align with your skills and interests. Don't wait until you get to pretirement to start making concrete plans. "Look for gaps or unmet needs that you can address with your expertise," Souffrant says. For example, if you've always dreamt of starting a business, start doing it on the side now.
Prioritize your health. More than a third of Americans retire earlier than planned because of a hardship such as a health challenge or disability, according to the EBRI/Greenwald Research Retirement Confidence Survey. Focus on your diet, get your exercise and be proactive about 'minor' health challenges today to reduce your risk of experiencing major health problems that force you to stop working before you choose to.
As Black women, we've often had to turn nothing into something, and we can make that skill work to our advantage as we continue to age. Strengthen your skills and build that side hustle while you're still working that nine to five, Souffrant says. "Financially prepare for the transition."
Discover how you can create a personalized action plan tailored to your current situation and long-term goals. Use these free Pretirement resources to get started and stay on track.