Financial planning and optimal retirement timing for physically intensive occupations

According to the O.E.C.D (See the O.E.C.D. WISE database: https://www.oecd.org/employment/skills-for-employment-indicators.htm ), 4 out of 10 workers in developed geographies occupy a “blue-collar” type of position. Those professions come with a toll on one’s health and require associated workers to carefully plan their retirement. If the topic of “blue-collar” retirement planning has been widely discussed with a productivity lens (and henceforth a firm or societal macro-level perspective), it has not benefited yet from individual financial planning considerations. This article therefore offers a discrete discounted cashflow model (and the associated sensitivity analysis) that could help “blue-collar” workers make an optimal financial decision between the gains generated by their activity and the long-term losses incurred by the healthcare expenses induced by their profession. The key finding is that blue collars’ retirement decisions should be heterogeneous. The primary reason is that different jobs yield different levels of physical intensity and therefore drive different retirement decisions. The second is that retirement decisions are heavily dependent on financial literacy which is known to be highly variable in this socio-professional category. Results thus suggest that the proposed model could prove of value, for instance to financial advisors looking to extend their services to blue-collar workers.