Why are Americans retiring earlier?

UNTIL THE covid-19 pandemic, the average age of retirement among Americans had been steadily moving upwards since the mid-1980s. That has stalled. The proportion of people aged 55 and over who are retired has risen by two percentage points compared with before the pandemic, to 50%. Nearly half of Americans (49. 9%) expect to retire before they turn 62, a two percentage-point increase from two years ago, according to the Federal Reserve Bank of New York. What is behind the change? One reason for it is that some Americans, particularly the well off, are choosing to take it easy: a booming stockmarket and soaring house prices have made early retirement more viable. For others, working through a public-health crisis has changed their priorities. Falling life expectancy—it decreased by 1. 9 years between 2018 and 2020—may have inspired some Americans to make the most of their golden years. Older workers may also be especially nervous about returning to offices, given that they face a higher risk of dying from covid-19 than their younger colleagues. But many Americans have not left the workforce by choice. The number of unemployed Americans who were permanently laid-off from their last job has grown by 1. 2m since the onset of the pandemic. And older people in particular see few opportunities to re-enter the job market. “There’s a real divergence between the haves and the have-nots, ” says Teresa Ghilarducci of the New School for Social Research in New York. Although retirements have increased overall, the trend varies based on education levels. Between 2019 and 2021 the proportion of people aged 55-64 who are retired increased slightly for those with a college degree but more significantly for those without. Older black and Hispanic people who did not graduate from college have also left the workforce at higher rates than their white contemporaries since the onset of the pandemic. Many older people who have lost their jobs do not expect to be able to find another. After the financial crisis of 2007-09, people aged 62 and above who lost their jobs were half as likely to re-enter the job market as those aged 25-34. Even in normal times, older workers struggle to regain jobs. Only 66. 5% of Americans aged 55-64 and older who lost jobs between 2017 and 2019 had been re-employed by January 2020, compared with 75% of workers aged 25-54. Among the over-65s, that fell to 44%. What seems to be a positive trend of Americans putting their feet up earlier may have worrying consequences. In the absence of private savings, unemployed Americans will rely more on social security, which already lifts 15m elderly Americans out of poverty according to the Centre on Budget and Policy Priorities, a think-tank. Temporary increases in unemployment benefits during the pandemic may have eased some of the financial pressures on older Americans, but those expired earlier this month. Many face an uncertain future.