Broker Check

Four Lessons to Maximize Your ROY: Returns on Yourself

It’s a cliché, but perhaps that’s why I employ it with prospective clients. “What’s your largest asset?” is the query.

“My home” is a common but incorrect reply, a delusion fueled by the real estate industry. “My 401(k)” is a close second for diligent investors.

Wrong again, in most cases.

On rare occasions, someone will tell me what I want to hear: “myself.”

I use this question to put many stressful issues in context. Stock market plunges, for example, become opportunities rather than calamities, when someone is highly likely to stay employed and systematically feed investments that are temporarily on sale.

This question and answer also help to reveal the need for life and disability income insurance for people who can expect to look forward to at least as many tomorrows as they can look back to yesterdays.

For most of our working lives, after all, we are money machines grinding out dollars for ourselves and those who depend on us. Retirement Daily contributor Jane Mepham stressed this point in her excellent article. {figure out how to insert link]

As I pointed out here [ figure out how to insert], your human capital may even play a significant role in your retirement. Given that it takes $100,000 of assets to generate $4,000 to $6,000 of income, even modest earnings can substitute for large investment balances. An income of $20,000 a year, for example, represents $500,000 invested in an IRA.

All of this brings us to the first and perhaps most obvious lesson.

Lesson One: You really are your biggest asset and will be for most of your life.

The significance of human capital—and the potential outside returns on focusing on growing it—hit home recently when I met Alicia, a woman looking forward to retiring in five years. She swings big wood, earning just over $300,000 annually, plus a potential bonus. But it wasn’t always that way.

In 2006 she was working at a non-profit, barely breaking 100K. She was divorced and had two children to educate. “I knew I had to make smart money moves,” she told me, adding “I knew that my biggest move was focusing on myself.”

How right she was. Her first move was to move to another non-profit—a high-profile university. That bumped her salary by 50 percent to $150,000. (She was 50 at the time.) This would generate $750,000 in nominal cash if she stayed put until 65. Given a 3 percent annual salary increase and 2 percent estimated inflation, the net present value of this move was just under $700,000 on day one.

Not bad for a job hop.

Lesson Two: Focus on the perks.

Alicia’s real payoff, however, came when her two daughters attended college tuition-free. There are a few ways to do the math, but if we keep it simple, $60,000 a year for eight years equals just under $500,000 in her pocket. The daughters were only two years away from matriculating, so the payoff came soon.

Did I mention it was tax-free? Apply a modest combined federal and state tax rate of 25 percent, and this amounts to $667,000 of pre-tax earnings.

Lesson Three: Don’t stay put. It’s a hassle to move, but it’ll pay off.

The university job was great. But a large portion of the compensation was the free tuition. She could only cash that check twice, once for each child. With both her daughters graduated, she popped her head up like a Meerkat to look for more opportunities. She managed her human capital into a big payday.

Her next job doubled her pay to just over $300,000 plus a bonus. She was 62. This one will likely ride her to her promised land of financial independence at age 70. This move should produce $1.3 million in additional value by the time Alicia retires at 70.

Adding it all up, Alicia’s late-in-the-game career prowess is stunning. She created just under $2 million of asset value at age 50 and above by deploying her human capital through strategic career moves. Short of hitting it big betting all her funds on a single stock, she would not have been able to create this value with traditional investing.

Lesson Four: Take a victory lap.

Alicia took her profitable journey in the non-profit sector. She built on success after success both to deliver what her employers needed and to meet her present and future needs. I see a similar strategy working well for clients in other industries as well.

If you have a traditional pension, there’s a chance that you may be fully eligible for it long before you turn 65. Each pension is unique, and you can easily find out the details of yours by securing the Summary Plan Description (SPD) from your human resources department. Some employees are eligible for a full unreduced pension at age 55 provided they’ve been with the company for 30 years.

This is commonly called the Rule of 85. It activates when your years of service plus your age equals 85, with a minimum age of 55. In these cases, a person can collect a full pension and go to work somewhere else. I call it taking the victory lap.

Consider a person earning $120,000 a year who is eligible for a $40,000 pension. She is not really earning $120,000, because she could stay home and collect $40,000 from her pension. If she’s highly skilled and well networked, she can retire from her job, collect her pension and work for another company for a similar or greater salary. She can use the pension to fund college for children, pay off her mortgage, maximize her retirement plans, or fulfill any other desire she may have. As in Alicia’s case, a job hop can pay big bucks.

I’ve assisted in this move many times. The ingredients for success are marketable skills, a network that recognizes this, a vested pension, and a willingness to move out of one’s comfort zone and change jobs.

This last criterion is usually the limiting step. People who spend 30 years in one job aren’t the switching type.

If this is you, get some help. Crunch the numbers. Ask yourself, do you want to be comfortable or wealthy in retirement? If the answer is the latter, get out of your comfort zone and work on that victory lap.

Wealth Comes from Many Places

If you want to be wealthy, count your blessings. That’s good mental health advice. If you want to achieve financial independence, consider all your potential sources of wealth. A dollar saved may be a dollar earned. Yet another $500,000 earned because of a job or career move means you can both save more and spend more, a win-win outcome for sure.

There’s only so much you can do with investing. Investing in yourself and managing your career like the asset it is, however, can catapult you into a new tier of prosperity.

Not everyone can replicate Alicia’s journey. Nor is everyone vested in a generous pension. Understood. But many readers approaching retirement are doing so with peak skills and are well networked. With a little creative thinking and daring, you may be able to create your own custom victory lap.

Sure, your current employer will be happy to exchange dollars for your time until retirement arrives. Alicia’s certainly would have been. But after just a bit of leg work you may discover as Alicia did that there are a few others who may put up many more dollars along with some perks. Focus on building and deploying all your capital--especially human. It’s a simple step that just pays off big.


Michael Lynch CFP is a financial planner with the Barnum Financial Group in Ft Myers, FL, where he focuses on his clients’ finances so they can focus on their lives. He teaches consumer-oriented financial planning courses for leading organizations, including Madison Square Garden and Yale New Haven Health Systems. He is a member of Ed Slott’s Elite IRA Advisor Group and the author of Keep It Simple, Make It Big: Money Management for a Meaningful Life, October 2020, and It’s All About the Income: A Simple System For a Big Retirement, May 2022. You can find more articles and videos at He can be reached at or 203-513-6032.

Securities, investment advisory services, and financial planning services are offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. 6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000. Any discussion of taxes is for general informational purposes only, does not purport to be complete or to cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should confer with their qualified legal, tax, and accounting advisors as appropriate.