Over half of unemployed older workers are at risk of involuntary retirement, according to The New School’s Retirement Equity Lab. Since March, 2.9 million older workers, those between the ages of 55 and 70, have left the labor force, and many face the risk of having to retire involuntarily due to increased health risks coupled with decreased job prospects.
This exit from the labor force is 50% higher than the 1.9 million older workers who left the labor force in the first three months after the Great Recession started in 2007.
Retirement Equity Lab expects another 1.1 million older workers will leave the labor force in the next three months. Should this happen, it will increase old-age poverty and exacerbate the recession, according to Retirement Equity Lab.
Between March and June of this year, 7% of those between the ages of 55 and 70 left the workforce, compared with 4.8% of those between the ages of 18 and 54. By comparison, in the first three months after the Great Recession, 4.7% of older workers left the workforce, while only 3.2% of those under the age of 55 exited.
Of the 1.3 million older workers who were unemployed in March, 500,000 gave up looking by June and left the labor force, the study found. During this period, 38% of older unemployed workers left the labor force, compared with 32% of younger unemployed workers.
“The longer the economy takes to recover, the more likely it is older workers will give up actively looking for work,” according to Retirement Equity Lab. “There is wide consensus among economists that we will not return to pre-recession levels of employment and output.”
The organization also says that, under normal economic conditions, older workers who are laid off are unlikely to re-enter the job market. Between 2008 and 2014, at least 52% of retirees over 55 lost their job involuntarily, either through job loss or a deterioration in health. Even if they look for a new job, it takes them twice as long as younger workers to find work, and, if they do find a job, their wages are typically 23% to 41% lower than their previous earnings.
Occupations hardest hit by widespread shutdowns, including manufacturing and low-paying service jobs, employ a greater share of older nonwhite and female workers. High-paying service jobs that disproportionately employ older white men did not shut down because their workers often could continue working from home. As a result, older nonwhite workers and older women experienced higher levels of job loss. Older white workers were the least affected by job loss.
Retirement Equity Lab says those who retire early take Social Security benefits early, which means the benefit is lower than if they had waited. They also begin drawing down their retirement savings early.
To help these workers, Retirement Equity Lab says the government should extend and increase unemployment benefits and reinstate the 10% penalty fee for early withdrawals from tax-advantaged retirement accounts that was removed by the Coronavirus Aid, Relief and Economic Security (CARES) Act. The lab also says the government should lower Medicare eligibility to age 50, expand Social Security and create a Federal Older Workers Bureau that would formulate standards and policies to promote the welfare of older workers and advance opportunities for profitable employment for them.
Similarly, a survey by NerdWallet from before the onset of the pandemic found that more than one third of retirees said it wasn’t their personal choice to leave the workforce. Eighteen percent left because of health-related matters, and 9% left because they simply could not find another job.
For those who are laid off and looking for health insurance options, those with fewer anticipated health care needs or those who have significant savings in a health savings account (HSA) may feel comfortable exploring the Patient Protection and Affordable Care Act (ACA) marketplace or other increasingly popular concierge or direct-care services. Others with chronic conditions that require frequent care or who need more comprehensive coverage will want to consider continuing their employer-sponsored coverage under COBRA [Consolidated Omnibus Budget Reconciliation Act], experts say.
Finally, those who are laid off should see if there is a way for them to delay taking Social Security benefits until age 70, when their benefit will be higher, according to the Center for Retirement Research at Boston College.