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Retirement Planning > Retirement Investing

Older Workers Who Scale Back Still Reap Big Retirement Benefits: Study

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In today’s economy, many older or semi-retired workers have chosen to prolong their days in the workforce with nontraditional jobs.

A nontraditional job refers to gig-economy jobs, on-call work, temporary positions, part-time slots and/or self-employment. These types of work, for the most part, do not come with employer-provided health insurance or a retirement savings plan, leaving those responsibilities to the nontraditional worker themselves.

There remains the question of whether workers gain from transitioning to nontraditional jobs to prolong their career, or whether a secure retirement depends on staying in traditional career employment.

A recent study conducted by Boston College’s Center for Retirement Research used replacement rate, or the ratio of a worker’s retirement income to their pre-retirement income, to measure retirement readiness among both traditional and nontraditional workers in their 60s. The study found that workers who are underprepared for retirement — and therefore choose to work past the age of 62 — see a clear improvement in their retirement readiness by ages 67 or 68.

While that may seem obvious, what researchers found surprising is that the gain in retirement readiness (measured by the replacement rate) for those who switch from traditional to nontraditional work is actually slightly greater than the increase for those who stay in traditional work.

The nontraditional workers were on track to replace 68% of their income, versus 65% for those who did only traditional work and 47% for those who stopped working.

This research illustrates that even jobs that do not offer the traditional health and retirement benefits can still help substantially in closing the retirement security gap. Older workers who can no longer or choose to no longer maintain their traditional career job, or who simply desire more flexibility and autonomy while still remaining a part of the workforce, can take solace in the fact that even nontraditional jobs can aid in their quest for retirement security.

— Check out Retirement Savings Mind Blower: Working 6 Months Longer Makes a Big Difference on ThinkAdvisor.


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