For many pre-retirees who are preparing to leave the working world, retirement savings – or rather the lack thereof – create significant stress. Stopping work without having a nest egg that you feel confident in is a risky statement, and it is not a decision that you should take lightly, because in your later years you do not want to fight for money.
The good news is that you do not have to commit to leaving the job for good if you quit your primary job. In fact, the Center for Retirement Research recently found that working in a non-traditional job (one without benefits) can actually help you be financially safer if you do it after you reach the age of 62. Here is what you need to know about trying this option.
Image Source: Getty Images.
How a non-traditional job works can boost your financial security
As CRR points out, working a job that does not provide benefits can damage pension security relative to traditional jobs when you are younger. That makes sense, because it can be harder to save for your later years if you do not have 401 (k) at work or if your employer does not offer health insurance and you have to pay for it yourself.
But things change when you get close to the end of your career. Studies have shown a disproportionate share of jobs held by workers 50 and older are non-traditional and may include independent contractors rather than on-call work. Doing these jobs later in life can help you improve your retirement prospects, as they enable you to extend your career or retire more slowly by providing a better work-life balance.
By making it both possible and more desirable to work longer, non-conventional employment contracts can enable you to delay social security claims so that you maximize benefits and improve your retirement prospects. They may also enable you to save more money late in life and rely on less saving. The effects of this are powerful, with CRR indicating that working longer hours – even in a non-traditional job – may be more effective in increasing your financial security at retirement than increasing the amount you save through your career.
Unfortunately, the data also show that people who reach the age of 62 with less pension security may be less likely than their wealthy colleagues to make non-traditional work arrangements, instead of leaving the workforce altogether. And that presents a great missed opportunity, because taking advantage of these alternative work options is the great opportunity to have enough money.
In fact, CRR found that those who do non-conventional jobs reduce the risk that they will not be able to sustain advance retirement at least as much as workers who stay in traditional jobs with benefits in their 60s.
Should you aim to work after 62 years?
Not everyone can work in the 60s, and this is not always desirable. But CRR research provides some good news, in that you do not need a traditional job with full benefits of jobs to support your financial security by working in your 60s.
It may be easier to find non-traditional work when you are old. If all this can make the difference in terms of enough money in retirement, then it is definitely worth trying if you can.
