Working past 62 improves retirement security: Study

Working contract or gig jobs into one’s 60s has become a way for many people to retire gradually, and such arrangements are linked to greater retirement security, a recent study found.

People who remain in the workforce past 62 in jobs that don't provide health insurance or retirement plans tend to do so after leaving career positions or because they have spent a lifetime in jobs without benefits and have little financial choice but to keep working.

A paper published this month by the Center for Retirement Research at Boston College examined how workers’ financial preparedness for retirement relates to their decision to continue working past age 62. The authors also looked at whether continuing to work actually helped people become able to retire.

“Holding nontraditional jobs -- those that provide neither health insurance nor retirement benefits -- at younger ages likely hurts retirement security relative to traditional jobs,” authors Matthew Rutledge and Gal Wettstein wrote. “But nontraditional work might be helpful to those looking to extend their careers for financial reasons.”

Nontraditional jobs include anything from lucrative contract work for people in highly specialized fields to part-time retail positions. Either way, having such work later in life generally improved people’s ability to retire, according to the study.

Of course, many people are unable to continue working for health reasons.

Among career workers in jobs offering perks like 401(k)s, those who had saved too little to retire comfortably were no more likely than peers with adequate savings to work in nontraditional jobs later in life. But for those who were financially unprepared to retire, working such jobs boosted their ability to retire “by at least as much as those who stay in traditional jobs,” according to the study.

“In fact, some evidence suggests that those who transition to nontraditional work have greater retirement wealth, especially business income, than those who stay in traditional work or who opt not to keep working,” the authors wrote. “Among those workers who are at risk of not maintaining their pre-retirement income level in retirement, however, nontraditional work appears to move them closer to retirement security.”

While gig jobs and other employment without benefits can allow people to save up for retirement in their years approaching it, just staying in the workforce can help improve retirement security because it lets people delay claiming Social Security or taking payments from their retirement accounts, according to the paper.

“The boost to retirement security from nontraditional jobs might be especially valuable to those who reach age 62 underprepared for retirement,” the authors wrote.

There are two caveats to the findings, the authors noted. The study found that people ages 67 to 68 improved their financial situations by virtue of working in nontraditional jobs, but those workers represent a small sample. Secondly, the results do not necessarily show a causal relationship, they wrote.

The study analyzed data from the University of Michigan’s Health and Retirement Study from 2002 to 2016 for several waves of workers between the ages of 61 and 68.