Once taboo, job-hopping is now normal even for workers past age 50—and new research shows that switching jobs mid- or late-career boosts retirement security.
There’s just one catch: Job changing at a later age generally must be voluntary to generate added retirement security, according to a report from the Center for Retirement Research at Boston College. Those who lose their jobs through downsizing or illness, and then find work, tend to retire earlier and with fewer resources.
That’s partly because they may lose valuable time for earning and saving during periods of unemployment. They also tend to end up in a lower-paying jobs than the ones they were forced to leave.
Meanwhile, those who voluntarily switch jobs mid-career are more likely to have done so opportunistically. They probably got a pay raise, or may just like their new job more. That makes them more likely than a displaced worker—or even one who reliably remains with the same employer—to be in the labor force until age 65. This gives them the best retirement prospects, the report finds.
Job changing among late-career workers has been on the rise since the 1980s, though it has declined a bit in recent years. The involuntary displacement rate of those aged 58 to 62 has remained fairly steady while the rate of those past age 50 changing jobs has risen by a third, the report finds. Translation: voluntary job-hopping accounts for most of the increase in late-career switches.
Changing jobs has risks, even for those who do so voluntarily. You lose tenure and may be first to be let go if your new employer struggles. You may find you are a poor match for the new role, or struggle with your new boss, the report notes. Yet even allowing for mismatches, the opportunistic aspect of voluntarily switching jobs is overwhelming.
Those who switch jobs by choice have a 9.1% greater likelihood of working to age 65 than those who stay with the same employer, the report finds. The benefit is slightly more pronounced among those with some college. Having a mortgage also correlates with working to age 65 for obvious reasons. Until that debt is paid, you may be stuck on a job even if it pays less and you hate it. That’s an important finding. Retiring with a mortgage doesn’t work for most people.
At the heart of the report is the idea that most people need to work longer to find financial security. That isn’t the case for everyone. If you have a traditional pension with guaranteed lifetime income, it might be enough when coupled with Social Security benefits. Workers with such a benefit tend to retire earlier, the report finds.
But the central message is a good one: As more people voluntarily switch jobs late career, many of them are earning more money or are enjoying what they do. So they stay at work longer, which significantly boosts their prospects for a happy retirement.