Is Nontraditional Work at Older Ages Associated with Better Retirement Security?

WP#2020-13

Abstract

Holding nontraditional jobs – those that provide neither health insurance nor retirement benefits – at younger ages likely hurts retirement security relative to traditional jobs. But nontraditional work might be helpful to those looking to extend their careers for financial reasons. This study uses the Health and Retirement Study to determine the extent to which workers in traditional jobs with less retirement security when they reach the cusp of retirement are more likely to move to nontraditional jobs in their mid- to late-60s than those who are more secure, all else equal. It then examines whether working in nontraditional jobs at older ages helps to improve their retirement security by ages 67-68. The results indicate that workers in traditional jobs who reach age 62 with less projected retirement income, relative to their pre- retirement standard of living, are no more likely to engage in nontraditional work after age 62 than those who are better prepared. 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. 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. These results suggest that nontraditional work may help underprepared workers in good health lengthen their careers and improve their retirement security.