This study investigates (1) the prevalence and dynamics of being underskilled among a sample of older workers from the Maastricht Cohort Study (n=1,111) and (2) the impact of being underskilled on need for recovery (NFR), the risk of losing employment and retirement intentions prospectively over two years follow-up. Being underskilled was associated with higher levels of NFR over time and with the risk to lose employment, whereas no associations with early retirement intentions were observed. To achieve sustainable employment, the course of underskilling should be monitored throughout the work career, enabling timely interventions to avoid the negative consequences of underskilling.