The COVID-19 crisis has taken its toll on the personal finances of most Americans. From job loss to adjusting savings and spending habits, COVID-19 has caused many of us to have to rethink money matters, and that includes retirement plans.
Remote work eliminated commutes and often allowed more flexible schedules with fewer interruptions. At the same time, the pandemic restricted many traditional retirement activities, including travel and visits with family. While some employed older workers look forward to retiring when restrictions ease, others say teleworking has made staying on the job more tenable – and that they are now delaying their original retirement plans.
Yet, for many, the pandemic also had the opposite impact. Those who could, when faced with the job squeeze caused by the pandemic, choose to hang it up and retire earlier than they would have if the pandemic hadn’t hit.
A Pew Research Center analysis of monthly labor force data found that the pace of retirements among baby boomers, those born from 1946 to 1964, accelerated during the pandemic. The number of boomers who reported that they were out of the labor force due to retirement grew 3.2 million in the third quarter of 2020 compared with the previous year. Before the pandemic, the number of retired boomers had been growing an average of 2 million each year since 2011, when the first boomer turned 65.
Some people retired to avoid COVID-19 exposure, while others may have been nudged to “seize the day” by the pandemic’s reminder of our mortality. But massive job losses may have forced many into early retirement, economists and financial planners say. This is very true of people close to retirement age. If you lose your job in your late 50s or early sixties, you are likely to have been at the peak of your career and earnings. The chance of finding a similarly paying job for someone of that age in the post-COVID economy is nearly impossible – leaving retirement or “semi-retirement” their only option.
A New School study found that in 2020, for the first time since 1973, workers 55 and older faced persistently higher unemployment rates than workers ages 35 to 54.
However, for those who found working from home a way to keep their jobs and found that they liked it, continuing to work and delaying retirement just a little bit could go a long way to shoring up your retirement savings. Working an extra year or two allows people to save more for retirement and take advantage of higher “catch-up” limits on 401(k)s, IRAs, and health savings accounts, says certified financial planner Nadine Burns of Ann Arbor, Michigan.
Nerd Wallet says that staying on the job can also help with one of the most important retirement decisions — when to start taking Social Security benefits. Applying before full retirement age, which ranges from 66 to 67, permanently reduces the checks that comprise a big chunk of most people’s retirement income.