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In reversal, retirements increased during pandemic

After decades in which it decreased, the retirement rate rose during the pandemic, according to the latest government data. This makes retirement one exception to the many ways that the pandemic accelerated preexisting trends, such as toward suburbanization and online shopping.

In the year since the pandemic started — the 12 months ending in March 2021 — 17% of Americans ages 55 to 64 were retired, up from 16.8% in the two previous years. But this is still a lower percentage than in earlier decades.

The retirement rate rose more for people 65 to 74, at 65.6% in the year up to March 2021, versus 64% in the year before the pandemic. That brought the rate back up almost to its level in 2011, though still below its 2001 level.

What can explain this trend during the pandemic? Job losses and business closings could have prompted some older workers to retire earlier than they had expected, a pattern seen in previous recessions. Another factor: Older workers were more at risk than younger ones from the coronavirus. At the same time, home prices and stock market values rose, putting some owners of such assets in a better position financially to retire.

The statistics on retirement come from the monthly Current Population Survey, which is also the source of the unemployment rate. The survey does not explore why people retired. But the patterns of those who retired, and when, can help tease out whether the increase during the pandemic was more about voluntary retirement because of rising wealth or involuntary retirement stemming from lost jobs or businesses.

People with college degrees were both less likely to lose their jobs in the recession and more likely to own assets that appreciated in value. The retirement rate rose during the pandemic for those ages 65 to 74 regardless of education level. But for those 55 to 64, the rate rose only for those without college degrees. In contrast, the retirement rate fell for those in the same age group who were college- educated — exactly the group whose retirement rate would have increased if rising asset values had been a key factor in prompting early retirements.

The timing of retirement during the pandemic further suggests that job losses, rather than rising asset values, explain more of the increase in retirement. Retirement rates were higher during the pandemic than before it, but they did not rise during the pandemic year. The rate for the first six months of the pandemic — April to September 2020 — was about the same as October 2020 to March 2021.

The rise in retirement during the pandemic is small relative to the longer-term decline in retirement rates. Increasing life expectancy, less physically demanding jobs and a rise in the minimum age to collect full Social Security benefits have all contributed to longer work lives and later retirements over the past 20 years.

Of course, the overall aging of the population has meant that a growing share of adults is retired, especially since the early 2010s, when the oldest baby boomers turned 65.

Now employers are once again eager to hire. Though older workers face discrimination in hiring, the years before the pandemic showed that a tight labor market can lure some retirees back to work.

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