Generally, American workers reach full retirement age at 66 or 67. Due to COVID-19 however, some are retiring much earlier.
Since March, 2.9 million older workers, those between the ages of 55 and 70, have left the labor force, according to a study by The New School’s Retirement Equity Lab. The U.S. Bureau of Labor Statistics (BLS) reports that the rate of employed U.S. workers age 65 years or older has fallen by roughly 16%. A working paper conducted by researchers at Tulane University, in conjunction with the National Bureau of Economic Research (NBER), found these workers are disproportionately impacted by COVID-19, and at a higher rate than other age groups.
These workers are noticing the toll the economic downturn has had on their retirement planning. In a research study conducted in June from the Bankers Life Center for a Secure Retirement, 54% of working adults say their retirement planning has taken a hit amid the pandemic, with losing money in the stock market (36%) and being forced to prioritize short-term savings (36%) cited as areas of top concern.
“People who retire early may need to use money from their retirement fund sooner than planned to make ends meet. Losing employer-sponsored health benefits along with an increase in out-of-pocket health expenses can create further financial strain for early retirees,” says the advisory team at CNO Financial who collaborated with Bankers Life, in a statement to PLANSPONSOR.
Kalimah White, a senior trust adviser and vice president at TD Wealth in Wilmington, Delaware, noted in a June interview with PLANSPONSOR that she urged her mother to retire out of fears of potential exposure to the virus. “She was worried about it, but I worked to help her realize she had sufficient funds and could retire,” she said. “Retirement isn’t as scary when you are forced to face it.”
Employees leaving the workplace earlier than anticipated can still lead a financially sound retirement. Understanding when and how to tap into assets, such as a 401(k) and/or annuity plans, assessing insurance needs, and planning for long-term care are key methods to achieving a blissful retirement.
Mike Heard, president of CNO Financial’s Worksite Division team, says workers should complete a thorough inventory of all finances and savings, including assets, debts, interest rates, income and expenses.
“We’ve seen far too many stories from our clients about how COVID-19 has forced them into taking an early retirement,” says Heard. “Our first piece of advice to them is always to pause and, before making any rash decisions, take a moment to evaluate.”In fact, studies have shown in previous years that participants who retire earlier than expected are able to keep their finances in order, and for some, at a better rate than previously thought. The Society of Actuaries’ 10th biannual Risks and Process of Retirement Survey, for which more than 2,000 people were interviewed, found that while 53% of pre-retirees expected to retire at 65 or older, almost the same number (54%) left the workforce at age 61 or younger. Additionally, 76% of retirees surveyed noted they are as financially well off or better than they expected before retirement.
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