While younger workers might have the luxury of finding new jobs with higher wages, the pandemic pushed many older workers to retire, according to a new study by The New School Schwartz Center for Economic Policy Analysis.
Out of 3.8 million older workers who lost their jobs in April 2020, 400,000 workers were retired involuntarily a year later, the study finds. Further, since March 2020, the size of the retired population between ages 55 and 74 has expanded beyond its normal level by 1.1 million people. The Schwartz Center used unemployment data to reach its conclusions.
“Those who retired left involuntarily,” says research associate Barbara Schuster. “People who could stay in their job made a choice to hold onto their job.”
Older workers who were pushed out of their jobs the first month of the pandemic found it difficult to find another job. "The combination of the shock and uncertainty brought about by the pandemic plus the accompanying recession caused many of these unemployed older workers to give up, thinking there was no way they would ever get hired again, so their unemployment turned into retirement," says Carol Fishman Cohen, CEO and co-founder of iRelaunch, a career reentry sourcing, consulting and training company.
Although there is a low unemployment rate, older workers still find it more difficult than younger workers to find a new job, and often a new position will pay less than their previous role, says Teresa Ghilarducci, director of the Schwartz Center. “When you’re that close to retirement and you lose a few years of earning, you also lose crucial pension and retirement contributions,” she says. Combine that with rising inflation and younger retirees may need to draw on their retirement savings to pay for food and gas, she says. In fact, younger retirees are in danger of falling from the middle class into poverty. [1]
Early retirement, especially when it’s unplanned, can lead to economic challenges. Here’s how to protect your retirement savings.
Wait until 70 to claim Social Security benefits
Only 7% of retirees wait until age 70 to claim Social Security. But those who wait until 70 will be eligible for around 32% more in monthly benefits, depending on when they were born. [2]
Downsize your home
One of the easiest ways to manage an unexpected retirement is to learn to live with a little less space. The U.S. housing market is red hot right now so if you own a home, consider selling it and buying a smaller house or condo, says Nick Covyeau, certified financial planner and founder of Swell Financial Partners in California. “If you have built up equity in your house, you can sell at a profit, buy a smaller house with cash and still have money left over to extend your retirement,” he says.
Move to a no income tax state
Residents in nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — pay no income taxes. If you’re planning to sell your home, you might want to consider moving to one of those states to further stretch your retirement funds, Covyeau says.
Consider rejoining the workforce
It is possible for older workers to return to the workplace, Cohen says. Many of the people iRelaunch works with decided to return to work either because retirement wasn't for them or they faced unanticipated financial pressures, she says. If you want to return to work, it’s important to show your value to any potential employer. “Part of the onus is on the older workers themselves, who need to put in the effort to become subject matter experts in their fields all over again and get very focused on where they can add the most value at an employer," Cohen says.
If you don’t want to restart your career, you could take a part-time job that aligns with an interest or hobby, perhaps at a library, bookstore or home improvement store, Covyeau says. A 30-hour-a-week job can be particularly helpful if you’re two or three years from your planned retirement age and want to delay claiming Social Security, he says.
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