Ah, retirement -- that time when you'll never have to work another day in your life. How do you get there? By making the most of your working days.

It may seem like a contradiction, but the better you are at working, the more likely you'll be able to stop. That's because you're not just a human -- you're an asset (congratulations!). You're a living, breathing, money-making machine.

I'm talking about your ability to earn a paycheck, today and for the rest of your career. Enhance your ability to churn out cash, and you'll improve your prospects for a better retirement.

In fact, some folks think that so-called "human capital" should be factored into your asset allocation. For example, finance professor Moshe Milevsky argues that workers with safe, secure incomes should take more risk with their portfolios, whereas those with less predictable income should play it safer.

Work smart, earn more, save a lot
Of course, your human capital doesn't benefit your retirement if you squander all your profits (i.e., spend everything you make). So let's look at three 22-year-olds who begin their careers on the same day, at the same pay ($30,000 a year). Here are their differences: The first earns an annual raise of 4% but doesn't save a dime of his paycheck; the second also gets 4% raises and saves 10% of each paycheck; the third also saves 10% of each paycheck but is a real go-getter, garnering 6% raises each year. Assuming their investments grow 8% a year, here's how much retirement savings each person would have at age 67:

  • The non-saver: $0 (No retirement for you!)
  • The 4% raise earner: $2,112,421
  • The 6% raise earner: $2,941,246

So our go-getter has 40% more retirement savings than the person who earned an average raise, and infinitely more than the non-saver (who could also be called the work-forever-er). But that's just part of the story. The final salaries are striking: $168,495 after 4% raises, $389,564 after 6% raises. So realistically, the person who earns 6% raises would probably have even more retirement savings, since she'll have more disposable income and will be more likely to save more than 10% each year.

And then there are the other sources of retirement income. Since Social Security benefits are based on earnings history, people who earn more during their careers will receive bigger checks. Ditto if the person receives a pension.

There's more to life than work
All that said, your career is more than the sum of your paychecks. Leaving a job you love for a higher salary may not be worth dreading the alarm clock's call every morning. But that's the other, fuzzier aspect of managing your human capital -- and retirement planning. If you have a job you enjoy, you may not want to retire, at least completely.

But even within rewarding professions not known for their high salaries, there are ways to enhance your skills and make yourself more valuable to your employer. (I was a teacher for five years, and I managed to do it.) And when the time comes for you to slow down -- perhaps wanting to work part-time, or just on a project basis -- the powers-that-be will be more willing to offer you flexibility.

I'm no career counselor, so you'll have to figure out yourself what would earn you a bonus, raise, or promotion -- or whether you should become your own business. But I do know that your human capital is probably the most significant asset in your retirement plan.

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