By Kerry Hannon
It’s a twofer for older workers. And that’s not a good thing.
Since March, many have lost jobs during the coronavirus pandemic and retirement accounts that are invested in the stock market have been twirling like those oversize Mad Tea Party tea cups at Magic Kingdom.
Let’s start with the job picture. Americans age 55 and older had an unemployment rate of 11.8% in May, up from just 2.6% in January, according to the U.S. Bureau of Labor Statistics. For women, the situation is worse: the current unemployment rate for women 55 and older is 13.6%.
“Unlike previous recessions, this pandemic-led downturn has hit older workers especially hard and will likely create long-term employment challenges for them,” according to Richard W. Johnson , who directs the program on retirement policy at the Urban Institute.
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Consider what happened when older workers lost their jobs in the Great Recession of 2008-09. “After the Great Recession, workers ages 62 and older were about half as likely to become reemployed as their counterparts ages 25 to 34,” wrote Johnson. “And when unemployed older workers found a new job, they earned barely half as much as they did on their previous job.”
So I was unhappy, but not surprised to read this headline in Jennifer Schramm’s blog last week: “ Devastating Job Losses May Be Pushing Older Workers into Retirement .” Schramm is a senior strategic policy adviser at the AARP Public Policy Institute.
Her data to back that up: The total number of workers ages 55+ in the U.S. economy shrank from 37.8 million in February, before the COVID-19-related layoffs began to take effect, to 32.7 million in May, she wrote.
Meantime, the labor-force participation rate (the percentage of the population either working or actively seeking work) for this age cohort dropped from 40.3% to 38.5%. “The numbers suggest that while many older workers displaced by COVID-19 job loss are still seeking work, a large number have dropped out of the labor market entirely,” Schramm wrote. “Thus, job losses associated with the pandemic may be leading to a substantial rise in earlier-than-planned retirement.”
Instead of firing up and fighting back to land a new job, it appears that an increasing number of older workers don’t have the stomach for rounds of potential rejections and offers of lower paying positions. Instead, they’re opting to step away and call it a day.
This is what happens. “When older workers lost their jobs in past recessions, they often retired, dropping out of the labor force instead of trying to find another job,” Johnson reports.
And yes, the National Bureau of Economic Research reported this month that following a record 128 months of expansion , the U.S. economy officially entered a recession in February.
The decision to retire early, however, can have lifelong economic costs. Working longer typically bolsters financial security because you keep earning and saving and don’t need to dip into your retirement accounts prematurely. That, in turn, allows those funds to continue to grow and rebound when markets wobble. And that income can also defray the cost of health insurance until Medicare kicks in at 65. Importantly, you can stave off turning on Social Security benefits.