The Pew Research Center reported in November 2021 that the COVID-19 recession had nudged an increased number of older Americans over age 55 into retirement. Their number rose by 2.2 percent from the third quarter of 2019 before the pandemic through the third quarter of 2021. Bloomberg reported in October 2021 that more than three million of them had retired early due to the coronavirus pandemic.
It begs the question: Did they come into ample wealth to pull the plug on their working years and head into early retirement, or was something else at play? The Employee Benefit Research Institute reported in its 2021 Retirement Confidence Survey last year that only 5 percent of those who had retired had done so due to job loss, and that 17 percent had actually pushed their anticipated retirement date back.
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COVID-19 and the Baby Boomers
A pivotal factor in play here is that a good many Baby Boomers – those born between 1946 and 1964 – were simply closing in on full retirement age as the pandemic bloomed. The number of retirees climbed by 3.5 million between 2019 and 2021 as a result. With or without the pandemic, it was just time. But older workers who might have held out a few more years did leave the workforce a little earlier than planned due to concerns for their health. They felt that they didn't want to unnecessarily expose themselves to the virus.
The COVID-19 pandemic seems to keep limping along, but the worst of the COVID recession technically only lasted a matter of months, from February through April of 2020. It nonetheless resulted in record unemployment. The U.S. experienced its highest unemployment rate since the Great Depression in April 2020. Available jobs had dropped by 10 million by the end of 2020.
Of those who continued working, three in 10 said they were saving less toward retirement due to the recession, but only one in 10 workers said they'd taken loans or early withdrawals from their retirement plans to get through, despite the CARES Act loosening up the usual rules to let them do so more easily.
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A good many now-retirees did experience a boost in wealth over the course of the pandemic without actually having to work for those dollars.
COVID’s Economic Effect on Golden Years
In fact, a good many now-retirees did experience a boost in wealth over the course of the pandemic without actually having to work for those dollars. Economic activity plummeted, but some asset values actually rose, making immediate retirement more attainable. Real estate prices climbed and homes were simply worth more, a good thing indeed for retirees considering taking out a reverse mortgage. Money was available to them in the form of home equity loans, too, albeit money that had to be paid back. The stock market initially slumped during the recession, but it had reached record highs by August 2020.
The CARES Act significantly eased the transition into retirement for many senior Americans when it was passed and signed into law in March 2020. Those who tested positive (or whose spouses or dependents had) and who suffered economic fallout due to quarantining, job loss, reduced work hours, pay cuts or other COVID-related circumstances were able to take non-penalized early withdrawals from various retirement accounts and retirement plans. This hastened their retirement timelines in many cases.
Many potential retirees also found that they were just spending less…and some have gotten used to it. Their nest eggs weren't being whittled away quite as quickly and retirement savings were stretching a bit further. They were dining out and traveling less due to the pandemic. Self-quarantining resulted in lesser clothing expenses. Spending less made retirement feel more feasible.
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The U.S. Bureau of Labor Statistics has indicated that it doesn't anticipate that Boomers will continue to head into retirement sooner rather than later as the pandemic eases. It estimates that about 40 percent of those ages 65 to 69 may actually reenter the labor force by 2030, particularly as health threats ease.
And, of course, ongoing national and international events can affect the situation as well. President Biden's 2023 budget includes money to bolster Social Security, while the war between Russia and Ukraine has negatively affected the economy. Only time will tell.
- Pew Research Center: Amid the Pandemic, a Rising Share of Older U.S. Adults Are Now Retired
- Economic Research/Federal Reserve Bank of St. Louis: The COVID Retirement Boom
- Society for Human Resource Management: What’s Happened to Retirement Expectations During the Pandemic?
- AARP: Pandemic Puts Secure Retirement at Greater Risk for Many Older Americans
- IRS: Coronavirus Relief for Retirement Plans and IRAs
- Bloomberg: Covid Early Retirees Top 3 Million in U.S., Fed Research Shows