A study by University of Michigan researchers I just read
about in the Squared Away blog from the Center for Retirement Research at Boston
College noted that “about 40% of Americans who were still working when they
turned 62 had moved to a new occupation sometime after age 55.” But when older
workers change occupations later in life, the study added, “they
experience a decrease in hourly earnings.”
Let
me unpack that study, which was called Occupational Transitions at
Older Ages: What Moves are People Making? Then, I’ll offer my five
rules to follow if you want to keep working into your 60s or beyond —
especially if you want to change careers to do it.
Taking a Pay Cut After a Career Switch
I
wasn’t terribly surprised by the researchers’ pay cut finding. The truth is,
based on the workers I’ve studied and interviewed for my books and articles, most workers who change careers
take a step down in salary when they start over.
But
here’s the interesting part: The researchers said the earnings decline “may
reflect strategic decisions on the part of workers who may be willing to trade
earnings for work hours flexibility or part-time work.”
How Job Changing Is Changing
That
echoes a recent report from The Center for Retirement Research at Boston
College showing that workers in their 50s are more likely to switch jobs (not
necessarily occupations) voluntarily and switch to ones that
lengthen their careers, compared to previous generations. Those who change jobs
are much more likely to still be in the labor force at 65 than those who stay
put.
Here’s
why the lower-wage finding by The University of Michigan researchers doesn't
upset me as much as it might on face value (and why I don’t think it should get
you terribly riled up either). Yes, it’s easy to feel undervalued when you’re
the new kid on the block and paid accordingly. That said, I think you need to
look at the broader picture: Staying on the job, even at lower wages, has some
real benefits.
Working for Less, Enjoying It More
If
the job change means you love work again, have less stress and keep earning a
paycheck for a few additional years, that can boost your prospects for
retirement security and your sanity.
You
can still contribute to retirement plans and refrain from dipping into existing
ones. You can delay claiming Social Security and get 8% bigger checks
each year you don’t take benefits between age 62 and 70. And studies show that
continuing to work helps people feel more relevant and needed and less isolated.
Women, Work and Retirement
It’s
also worth noting that the Michigan researchers found differences between men
and women regarding working into retirement. They discovered that women with
higher earnings before retirement were more likely than men to return to work
after retiring from their primary career.
Or,
maybe, never leave it. As I wrote in this Next Avenue column,
the Women Working Longer: Facts and Some Explanations study by
Harvard University economists Claudia Goldin and Lawrence F. Katz reported that
a large fraction of women are working a lot longer than in previous generations
— past their sixties and even into their seventies. “Women are remaining on
their jobs as they age rather than scaling down or leaving for positions with
shorter hours and fewer days,” they said. “Higher levels of employment for
women older than fifty-five years also appear to be among those who are healthier
and whose occupations are the most rewarding and least physically taxing.”
5 Rules to Keep Working and to Switch Careers
So
how can women and men boost their chances of working into their 60s and beyond,
particularly in a new field? Here’s how:
1. Plan for a pay cut. If
you hope to change occupations, start shaving debts and downsizing three or so
years ahead of time. My mantra: In order to make a successful career
transition, you need to be financially fit. Then, you can accept a job paying
less than your previous position, but one that makes you happy or brings
meaning to your life and perhaps helps others along the way.
2. Keep learning, and adding, skills. The job posting will indicate which skills are required for the
position you’re chasing. If you currently employed and your employer offers
continuing education or professional development programs, sign up for them.
3. Find out what the position pays. That way, you’ll be prepared when the time comes to discuss
salary with a prospective employer. Job postings rarely mention salary, so
search for what the position is likely to pay where you live at Glassdoor.com, Payscale.com, Salary.com or the
site of the Economic
Research Institute. For government jobs, check the U.S. Office of Personnel Management
site.
If
you’re interested in a nonprofit, check out the organization’s latest online
tax filing (Form 990) to see how much its key employees earn. Keep in mind that
working for a nonprofit with a mission that matters to you may make up for a
drop in pay.
4. Realize that money is not everything. Find ways to sweeten the offer around the edges.
See if you can bump up your benefits. For example, you might want to try for
more flextime, telecommuting,
more vacation time or the ability to bring your dog to work. (That last one
would work for me!)
These
kinds of perks might be more valuable to you at this age, giving you more time
to do what you really want to do.
5. Consider which core benefits you truly need. Health insurance, retirement savings plans and
paid time off could play a significant role in determining your perfect job
right now. But if your spouse or partner has health benefits at work, for
example, you may not need them. This could then be a bargaining chip to trade
for something you do want, such as more vacation days.
One
last thing: 82% of respondents to a survey by
the American Institute for Economic Research reported that they made a successful transition to a new
career after age 45. And of those who initially took pay cuts, half saw an
increase in earnings over time after “a period of hard work and persistence.”
- Kerry Hannon
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