Treat Your Work as a Retirement Asset

Income from work is one of the most critical parts of your retirement plan, especially in the last decade of your career. It's a time when most people enjoy career-high earnings and sometimes have the opportunity to play catch-up on savings. And extending your number of years at work helps make it possible to boost monthly Social Security income down the road through delayed filing credits.

But wages can be a risky income source at this time of life, and that can play havoc with your retirement plan. Just under 40% of workers retire earlier than expected, usually owing to job loss or health problems. Those who lose jobs unexpectedly and then secure new positions often do so at far lower levels of pay.

That means it's important to treat your work as an asset that needs careful management in the years leading up to retirement. Research on human capital suggests that this asset must be balanced against other financial resources according to its level of risk. But it's also important to make investments to maximize human capital, as it tends to dwindle toward the end of careers.

The goal here is not necessarily to stick with the job you've been doing--it could involve a shift to part-time work, consulting, an entrepreneurial project, or gig work in the sharing economy.

One bit of good news: The job prospects for older workers seem to be improving. That's not to say many employers have received the message about the value of keeping older workers around--I'll believe that when I see it, and so far there is plenty evidence to suggest that age discrimination remains rampant and largely unchecked.

A 2009 U.S. Supreme Court decision made it tougher for workers to prove age discrimination claims under the Age Discrimination in Employment Act, and legislation has been proposed to shore up the law. High-profile cases of alleged discrimination continue to surface--for example, ProPublica in 2018 documented widespread age discrimination at IBM, and a group of employees recently sued the company, accusing it of failing to comply with federal employment law.

Instead, laws of supply and demand drive the improved outlook. Labor markets are much tighter now than they were during the Great Recession of 2008-09 and for many years after that.

"There is a fundamental shift going on in the economy, and there's no going back," argues Chris Farrell, author of Purpose and a Paycheck: Finding Meaning, Money, and Happiness in the Second Half of Life, a new book that offers a close look at how the economy is evolving as the country ages. "And what has accelerated the shift is this relatively tight labor market that we're now experiencing."

Indeed, in May 2019, the jobless rate for workers age 55 and older was 2.7%, nearly 1 percentage point lower than the national rate of 3.6%.

A recent survey by Willis Towers Watson of 143 large employers found that they are adopting a range of new strategies for near-retirees. One third of the employers have adopted flexible employment options; half now engage former employees as consultants or contingent workers; a smaller number--9%--are adopting phased retirement programs.

In most cases, companies adopting these practices are doing it on an ad hoc basis, says Alan Glickstein, a retirement consultant at Willis Towers Watson and a co-author of the report. That means employees closing in on traditional retirement age who hope to pursue flexible work arrangements may need to make the first move.

"If you don't ask about it, you probably won't get it," he says. "It's in your mutual best interest to be open with your employer about where you are headed in the next few years. Let them know what you hope to achieve, and that you'd like to do it there if possible, but need to know what kind of options are available."

It's also a good idea to make an honest assessment of your career prospects around the time you turn 50.

That should start with an assessment of job security. Is the industry you work in going through substantial change, or is it likely to do so in the coming decade? How about your employer?

Next, consider the value you offer to your employer.

"The most important thing is to really reflect back on who you are at this point in your life," says John Tarnoff, a career coach and author of Boomer Reinvention: How to Create Your Dream Career Over 50. "Think about what you have learned and what value you provide--not just the mechanics of what you do every day."

Also make an evaluation of current skills and how they match up to positions you might seek before or after retirement. LinkedIn is a good resource for this exercise, suggests Marci Alboher, vice president of Encore.org.

"Look at the profiles of people doing things that might interest you and look at those jobs--what skills do they require?" Another good evaluation tool: Ask colleagues how they perceive your strengths and weaknesses. Performance evaluations also present an opportunity for these conversations.

If you're coming up short, Alboher recommends LinkedIn Learning as an inexpensive place to acquire new skills. (She recently launched her own course there on Encore Careers.) Other ways to acquire new skills are through volunteer work or by doing an informal internship that offers the opportunity to learn.

Freshening up skills and trying new things also can prevent job burnout, which can sink later-life work plans.

"It's critical to stay in love with your job," says Kerry Hannon, author of Great Jobs for Everyone 50+ and a just-published book called Never Too Old to Get Rich: The Entrepreneur's Guide to Starting a Business Mid-Life. "People will sometimes complain that they hate their job or their boss, but the truth is they're just bored and trying to stay under the radar until it's time to retire."

Mark Miller is a journalist and author who writes about trends in retirement and aging. He is a columnist for Reuters and also contributes to WealthManagement.com and the AARP magazine. He publishes a weekly newsletter on news and trends in the field at Retirement Revised. The views expressed in this column do not necessarily reflect the views of Morningstar.com.