In February 2018, we wrote about how workers were retiring later than ever before. Now, just over three and a half years later, we're experiencing a huge wave of early retirements. What happened?
COVID-19 was, of course, a major catalyst. During the bleak early days of the pandemic in mid-2020, seniors started retiring early in droves. According to a study released by the Federal Reserve Bank of St. Louis, there have been roughly 2.5 million more retirements than expected through the first 18 months of the pandemic. So what's driving this trend? And what does it mean for your retirement plans?
Baby Boomers Are Driving the Great Reassessment
You've probably heard about the Great Resignation. Millions of workers have chosen to quit their jobs and look for better opportunities in the wake of the pandemic. And with the trend continuing to accelerate, it's clear that more and more people are looking for a change.
Some are now calling it the Great Reassessment. Rather than simply looking for more pay, people are reconsidering their priorities and what's important in life. Whether it be more flexibility to work from home or finding a more satisfying career, people are reassessing how work fits into their life.
This is especially true for people nearing retirement age. After working for decades, it's easy to see the appeal of wrapping up your career. But what's causing these folks to actually take the plunge more than ever before?
Why Are Seniors Leaving the Workforce in Droves?
The pandemic has played a part in driving the trend, but it’s not the whole story. Other ongoing factors are causing baby boomers to consider early retirement more than ever before:
- Health Concerns - Seniors have a higher risk of serious complications from COVID-19. For many, going back to work represents an unnecessary risk, and it has led to early retirements.
- Lack of Worthwhile Opportunities - Vast experience is usually an asset. However, in a corporate world where companies are increasingly cutting costs, that experience - and the expectation of higher pay - can work against you. Faced with the prospect of taking a pay cut, many seniors decided to leave the workforce.
- Wanting to Enjoy Retirement - For others, retiring early is a chance to relax and enrich their lives. After working and saving for years, many would rather pursue their retirement dreams now than work a couple more years.
- Financial Stability - The economy struggled during the early days of the pandemic, but markets recovered quickly. Anyone who followed their investment process probably recouped their short-term losses and might even have come out ahead as markets grew through 2021. Or maybe you saved some extra money during this time of reduced commuting, traveling, and going out for social events.
- Change of Scenery - People had been steadily moving out of cities before COVID-19, and the pandemic accelerated this. For some people nearing retirement, this provided the opportunity to both leave the workforce early and move to their desired retirement location.
Are You Ready to Enjoy an Early Retirement?
If you’re one of the millions of people contemplating early retirement, there are a few things to think about before you make the leap.
First, are you ready to retire? There’s more to a retirement plan than having enough money saved. Make sure you’re financially able to stop working, but also that you actually want to. Work is a big piece of identity for many folks, and stepping away takes time and reflection.
Keep in mind, retirement doesn’t have to be forever. You can take a year or two off and re-enter the workforce later. The remote work boom has created opportunities for part-time work in retirement. It can be a great way to stay active and engaged, and earn a bit of extra money without the stress of a full-time job.
When you do decide to leave your job for good, there are some key preparations for retirement. For example, you need to make sure you have health insurance lined up, a plan for your living expenses, and have a handle on all of your retirement accounts.
If you’re not sure whether you’ve covered all of your retirement planning needs, a fiduciary advisor can help you with the final details. They have the experience and expertise to address any questions you might have. More importantly, they’re legally obligated to act in their clients’ best interests, so you can rest easy knowing that your retirement is in good hands.
Ready to leave the working world behind? Download our 2021 Essential Retirement Guide to make sure you’re prepared for a secure and comfortable retirement.