More than half of the estimated 5.25 million people who left the workforce during the Covid-19 pandemic appear to have retired earlier than they planned to, a new research brief indicates.
As of the end of August, about 3 million people retired earlier than they likely planned to as a result of the Covid environment, according to the report by Miguel Faria-e-Castro, senior economist at the Federal Reserve Bank of St. Louis.
At the start of the U.S. Covid outbreak in March 2020, an estimated 18.3% of the population was retired, according to the report. By August 2021, that figure had increased to 19.3%, reflected an even faster rate than had been seen as the wave of baby boomers entered retirement, the report noted.
“There are several reasons why some people may have decided to retire early, some directly related to the pandemic,” the paper read.
That could reflect older workers often being more vulnerable to serious infection and thus more inclined to stay away from jobs that require a physical presence. But another major factor was the sharp increase in stock prices and real estate values that lifted the amount of wealth for many, the author noted.
“Standard theories of household behavior predict that when people get richer, they work less, and there is some evidence that the evolution of asset values influenced labor force participation in previous recessions, especially for those closer to retirement,” the report read. “The large rise in asset valuations during the pandemic suggests that retirement may have become feasible for many people.”
The new research contributes to a complex picture of how the pandemic is changing the nature of work. In the early months following the start of the pandemic, many workers in a range of industries were laid off, and some who were close to the traditional retirement age of 65 have remained out of the workforce — in some cases by choice.
An earlier report from Pew Research Center found that the pace of baby boomer retirement shot up in 2020, with 3.2% of boomers retiring, more than double the rate of 1.5% seen in 2019.
However, other factors, including the new acceptance of remote work by companies, has encouraged others to postpone retirement. For them, working from home means they no longer have to deal with grueling commutes or the stresses and potential health risks of being in an office.
A report in March from the National Institute on Retirement Security found that two-thirds of people who have delayed retiring have done so because of Covid. That report is based on a survey in December 2020 of more than 1,200 working-age adults. A similar percentage of people said the country faces a retirement crisis, and more than half of them said that they feared not being financially prepared to retire.
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