The timing of retirement during the pandemic further suggests that job losses, rather than rising asset values, explain more of the increase in retirement. Retirement rates were higher during the pandemic than before it, but they did not rise during the pandemic year. The rate for the first six months of the pandemic — April 2020 to September 2020 — was about the same as from October 2020 to March 2021. People with college degrees were both less likely to lose their jobs in the recession and more likely to own assets whose value appreciated. The retirement rate rose during the pandemic for those 65-74, regardless of education level. But for those 55-64, the rate rose only for those without a college degree. In contrast, the retirement rate fell for 55-64-year-olds with a college degree — exactly the group whose retirement rate would have increased if rising asset values had been a key factor in prompting early retirements. The seasonally adjusted retirement rate averaged 17.0% for 55-64-year-olds and 65.6% for 65-74-year-olds in both halves of the year.
What can explain this trend during the pandemic? Job losses and business closings could have prompted some older workers to retire earlier than they had expected, a pattern seen in previous recessions. Another factor: Older workers were more at risk than younger ones from the coronavirus. At the same time, home prices and stock market values rose, putting some owners of such assets in a better position financially to retire. The retirement rate rose more for people 65-74: It was 65.6% in the year up to March 2021, versus 64.0% in the year before the pandemic. That brought the rate back up almost to its level in 2011, though still below its 2001 level.
The statistics on retirement come from the monthly Current Population Survey, which is also the source of the unemployment rate and other key labor market measures. The survey does not explore why people retired. But the patterns of who retired, and when, can help tease out whether the increase during the pandemic was more about voluntary retirement because of rising wealth or involuntary retirement stemming from lost jobs or businesses. In the year since the pandemic started — the 12 months ending in March 2021 — 17.0% of Americans ages 55-64 were retired, up from 16.8% in the two previous years. But this is still a lower percentage than in earlier decades.
Even though the retirement rate increased during the pandemic, it will not necessarily rise further. It is worth emphasizing that the retirement rate rose around the start of the pandemic but did not continue to do so. After the initial spike in joblessness at the start of the pandemic, the share of those 55-64 who were out of work but not retired fell rapidly without a further rise in retirement. Now, employers are once again eager to hire. Though older workers face discrimination in hiring, the years before the pandemic showed that a tight labor market can lure some retirees back to work. Of course, the overall aging of the population has meant that a growing share of adults is retired, especially since the early 2010s, when the oldest baby boomers turned 65. All the data in this analysis are focused on specific age groups and adjust for the changing age distribution even within these groups.
The rise in retirement during the pandemic is small relative to the longer-term decline in retirement rates. Increasing life expectancy, less physically demanding jobs, and a rise in the minimum age to collect full Social Security benefits have all contributed to longer work lives and later retirements over the past 20 years. This time pattern of the rise in retirement coincides with the economic shutdown, business closures and job losses starting in March 2020. But one measure of asset prices — the S&P 500 — fell as the pandemic began, remained below its pre-pandemic peak until August, and was consistently above its pre-pandemic peak starting only in November. If higher asset prices, not job losses and business closings, were the main driver of pandemic retirement, the retirement rate should have increased as the pandemic wore on and as stock values rose.
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