By Lisa Ward
It’s no surprise that more Americans are working past retirement age. What may be surprising is one of the possible reasons why.
New research conducted by Boston College’s Center for Retirement Research suggests that a late-career job switch may play a big part in keeping Americans toiling away into their golden years.
The research paper found that if someone switches jobs voluntarily in their 50s, it increases the likelihood of them still working at 65 by about 20%. The data suggest that the new job is somehow better, thus encouraging—or at least enabling—people who switch jobs voluntarily to work longer. When workers in their 50s are laid off, by contrast, they have difficulty finding new jobs, and they tend to earn less if they do find a new job at all.
The researchers aren’t entirely sure what type of work kept older workers clocking in after switching jobs, but they think it has less to do with the size of the workers’ paycheck, and more to do with the flexibility and meaningfulness they derive from the work.
About 44% of people are still working at 65 years old, according to an analysis of the Health and Retirement Study, a biennial survey published by the University of Michigan, conducted by the study’s authors.
The Wall Street Journal spoke to Geoffrey T. Sanzenbacher, one of the working paper’s authors and a research economist at the Center for Retirement Research at Boston College. Below are edited excerpts of the conversation.
WSJ: What did the study find?
DR. SANZENBACHER: We found people who do switch jobs voluntarily typically end up working significantly longer. They were about 8 to 10 percentage points more likely to be working at age 65. So, about 53% of job switchers were still working when they were 65 years old, compared to 44% in the total sample we studied. On the face of it, that may not seem like much of a difference, but it’s significant. It means that people who switched jobs in their 50s increased their chances of working in their 60s by about 20%.
We found that effect for both women and men. It was also significant for workers with or without some college education. Workers with a high-school degree, who are especially vulnerable to automation, seemed to get the least benefit, but still benefited nonetheless. Those with some college were 10.9 percentage points more likely to be working at 65 and those with a high-school degree only were 7.5 percentage points more likely.
WSJ: Did you notice any other interesting trends?
DR. SANZENBACHER: People who still had a mortgage when they were 60 end up working longer. So, that increases the probability of working at 65 by about 10%.
This is interesting because more people are arriving at retirement with a mortgage than in previous decades. Using data from the Federal Reserve Bank of New York’s Survey of Consumer Finances, I wrote a paper which shows that the number of households 55 years and older with an outstanding mortgage increased about 8% between 2001 and 2013.
The trend may plateau as housing prices return to normal after the Great Recession. But it could be permanent, too, reflecting different borrowing habits than in generations past when people retired free and clear of mortgage payments.
One recent study by the University of Michigan’s Retirement Research Center found older Americans have more debt mostly because they purchased more expensive homes with smaller down payments, and baby boomers were particularly likely to engage in these sorts of risky borrowing practices. Meanwhile, many millennials are delaying buying homes until later in life, so if they make all their payments on a 30-year mortgage, they are likely to carry that debt into their 60s and have an outstanding balance heading into retirement. So it’s the same problem but for a different reason.
If this is the case, people will either need to save more for retirement or work longer and extend their career. This research suggests that people often end up working longer.
WSJ: Why did people switch jobs?
DR. SANZENBACHER: The most common reason was to reduce stress. About 41% of the cohort ended up in less-stressful jobs. But stress alone didn’t have a significant effect on when people actually retired. In fact, many of the variables we looked at, including whether the job was physically demanding or offered health insurance, didn’t fully explain what it is about the new job that made them work longer.
So we are really interested in what kinds of jobs encourage people to stay in the workforce. We plan to look at other variables in the future, particularly flexibility—jobs allowing work to be done outside normal business hours or from home.
We also want to study meaningfulness. That is, if people derive meaning from their work. If they like the job better, they will do it longer, so we need to figure out what better actually means.
WSJ: Fewer people stay in a single job, and freelance work is much more common. Might those changes help older workers to lengthen their careers?
DR. SANZENBACHER: The gig economy could actually really help. Older workers may increasingly switch to jobs like consulting because they offer more flexibility and less stress. And these sorts of job opportunities might encourage workers to stay in the labor force longer. A recent paper from the National Bureau of Economic Research showed that workers aged 55 to 75 are more likely to occupy these sorts of positions than younger workers.
The internet has definitely reduced the overall cost of looking for a new job. In the past, workers had to print and send out résumés, go on job interviews, now applicants can apply online and Skpe, making it less work and a lot easier to find a new job.
So, workers today are also more mobile, switching jobs more frequently, and there is an overall concern that this trend could force people to retire early. After all, it’s well established that new workers are the first to be laid off. But this research shows the contrary: the trend could actually benefit older workers.
WSJ: Are there any policy implications for this paper?
DR. SANZENBACHER: Being able to buy affordable health insurance outside of work may make it easier to take a more flexible job, without health insurance. That may be more appealing to older workers. So rolling back the Affordable Care Act may actually keep older workers in their jobs, especially if they are receiving health insurance, and limit their ability to switch jobs later in their career.