Nearly 5 million people ages 55 to 70 have lost their jobs since March, and many of them are unlikely to return to the workforce, according to a report this week from The New School’s Retirement Equity Lab.
That decision isn’t necessarily voluntary. Nearly 3 million of the people who became unemployed this year have indicated that they don’t plan to return to work, the report found. That hints at something that observers have feared — that the pandemic is prompting many to retire earlier than they had anticipated. That trend could have lasting effects on retirees’ well-being, as well as on the economy broadly, according to the report.
“If the rate of labor force exits continues over the next three months, we expect an additional 1.1 million older workers to leave the labor force, adding to the 2.9 million who already left,” the report read. “A total of 4 million people potentially pushed into retirement before they are ready will increase old-age poverty and exacerbate the recession.”
About 7% of people age 55 to 70 have left the labor market this year, compared with just 4.7% of people in that age group during the 2008 recession, according to The New School’s paper. Among people 18 to 54, 4.8% reported being out of the workforce entirely, compared with 3.2% who said so in 2008, the report noted.
There has been a greater effect on women and people of color. While 5.8% of white men in that age group have left the workforce, 7.5% of white women have done so. Alarmingly, 10.2% of nonwhite men and 11.8% of nonwhite women in that age group have left the labor market, the report found.
Losing a job, especially during a recession, can have an outsize effect on older workers. Finding new employment is often difficult, and if they do find a job, in many cases the pay is lower than what they had earned previously.
“Between 2008 and 2014, at least 52% of retirees over 55 left their last job involuntarily, the result of job loss or a deterioration in health,” the report read. “Additionally, older workers who lose their job take nearly twice as long to find a new job compared to young workers. Even if jobless older workers find a new job, they can expect their new wages to be 23-41% less than their previous earnings.”
Of the roughly 3 million people 55 to 70 who have left the workforce this year, 42% have said they retired, according to the report. Much of that figure reflected unplanned retirement, as 28% of people in that age group who lost work during the last recession said they had retired.
Adding to the difficulty of finding work is another, potentially larger risk for older workers — that they could contract COVID-19. That factor is likely discouraging many from seeking work in the current environment, the report noted.
Retiring earlier than planned can have several financial effects, including claiming Social Security earlier, having less money saved for retirement and drawing down retirement assets early.
“All three factors put involuntary retirees at risk of poverty in retirement,” The New School paper said.
To help address this emerging retirement crisis, The New School encouraged Congress to extend unemployment benefits for older workers and take steps to discourage people from dipping into their 401(k)s early. The school also suggests lowering Medicare eligibility to age 50 and establishing a “Federal Older Workers Bureau.”
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As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.