The COVID-19 pandemic may have pushed millions of older workers out of the workforce prematurely. A report published earlier this month from the Schwartz Center for Economic Policy Analysis (SCEPA) at The New School showed that 2.8 million older workers have left their jobs since March — and ongoing economic turmoil coupled with poor health could make it difficult to resume their career elsewhere.
Some may have already given up. Per the report, 38% of unemployed older employees stopped looking for work and exited the workforce. Over the course of the next three months, SCEPA expects that an additional 1.1 million older workers will do the same.
Involuntary retirement may be particularly acute among older nonwhite and female workers. Per the report, nearly 2 in 10 nonwhite older workers lost their jobs, while 19.5% of nonwhite women lost their jobs and 11.8% left the workforce.
But why are older workers choosing to exit the workforce while participation from their younger counterparts has begun to rebound? It could have something to do with Centers for Disease Control and Prevention reports that over 90% of COVID-19 hospitalizations and deaths have been attributed to people ages 55 and over.
“Given the health risks older workers face by working, it is likely they are making the difficult choice between protecting their health and the decreased living standards that often come with involuntary retirement,” read the report.
For those older workers, early and unplanned retirement could have disastrous financial repercussions as they run the risk of outliving their savings, leveraging retirement assets prematurely when they should be putting money towards IRA’s and 401(k)s. “People who retire earlier than planned often claim Social Security benefits earlier, leaving them with lower monthly benefits for the rest of their life,” reads the study.
Typically it is recommended that a household’s share of preretirement earnings is replaced by retirement income at a rate of around 70%. However, the report notes that the replacement rate for older workers is expected to drop from 55% to 48% if they retire at age 62 or from 69% to 60% if they retire at 65.
“The COVID-19 recession will force 3.1 million older workers and their spouses into de facto poverty when they retire, which represents a 4 percentage point increase in near retirees expected to experience de facto poverty in retirement,” reads the study.
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