With stocks tanking and nest eggs cracking, retirement is clearly less affordable. Why, then, has there been a surge in folks leaving the workforce for good?
Portfolios are down, leaving fewer assets to generate income. Housing equity has been slashed, too. Headlines the past few years, and again very recently, have been about older folks forced to work longer.
Yet the rate of retirements is on the rise, according to a recent study, The Market Crash and Mass Layoffs: How the Current Economic Crisis May Affect Retirement by researchers Courtney Coile and Phillip Levine at Wellesley College.
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The authors note that Social Security claims are rising much faster than folks are becoming eligible to collect Social Security benefits. This suggests that many who had been putting off benefits (and retirement) are now cashing in along with a bunch of the newly eligible. From the authors:
“Why are more workers retiring now if their expected retirement income is going down? The answer may lie in another aspect of the crisis, the weak labor market.”
Coile and Levine found that older workers who are unable to find jobs in this weak labor market and are running short on cash increasingly are choosing to call it a day and tap their benefits rather than stay in the job hunt. This trend is overpowering any momentum by older workers able to keep or find work and stay on the job longer. From the authors:
“We predict that the increase in retirement brought about by the recent rise in unemployment will be almost 50 percent larger than the decrease in retirement brought about by the stock market crash.”
In other words, for every two pre-retirees who stay at work longer, three will give up due to the weak labor market and start their retirement ahead of schedule — almost certainly with less than they had hoped and with few good options.
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Stock market movement and the labor market have little influence on the retirement decisions of folks aged 55 to 61, according to the study. But those two forces weigh heavily on the timing of folks aged 62 to 69. Interestingly, real estate values had little bearing for either age group.
Among the 62-69 set, those with more education were more influenced by the stock market while those with less education were more influenced by the labor market. From the authors:
“Overall, our findings suggest that the plight of those who are forced to retire early as a result of weak labor market conditions merits greater attention. It is often those on the bottom of the economic ladder who are being hurt by retiring prematurely due to labor market factors.”
In this environment, it seems the only people who will have the chance to work well into their retirement years are those who can most afford to quit.