You’ve been working hard all your life, and over the past several years you’ve formulated a clear timeline for retirement – a plan that has withstood upsizing, downsizing, recession, and a whole host of financial challenges. But now, as you’re approaching that chapter of your work life where your plans start to come to fruition, along comes a global health crisis that none but a handful of epidemiologists foresaw. The COVID-19 pandemic has, in just six short months, disrupted practically everything, including (perhaps) the carefully-planned timing of your retirement. Now what?
COVID-19 Scrambles Retirement Plans, Eliminates Jobs
Just a few weeks ago, New York Times reporter Mark Miller wrote an article in which he analyzed the retirement dilemma facing many U.S. seniors. “It’s still early,” he says, “but experts believe the pandemic will upend the timing of retirement plans of many older workers. In some cases, their decisions will be voluntary; in other cases, retirement may be forced upon them by job elimination or unavoidable health risk.” These experienced workers may have been gainfully employed at the start of 2020, but now face an extremely uncertain employment future.
The ripple effect of unplanned retirement is pervasive, says the New York Times article. Workers leaving jobs early often start Social Security years before they had planned, resulting in a lifetime of lower benefits. This adverse impact on Social Security amounts to a double whammy, since benefits are based on lifetime earnings, and if a worker leaves a higher-paying job early it often reduces the benefit calculation. Early retirement also means dipping into savings earlier and losing employer-paid health care. The economic impact, not to mention the emotional toll, can be devastating.
Retirement Plans in a Pandemic: Senior Unemployment Is On the Rise
“In a typical recession,” says the New York Times report, “the unemployment rate for older workers remains below that of their younger counterparts, but that’s not the case this time.” According to Richard W. Johnson, director of the program on retirement policy at the Urban Institute, during May 2020 fully 26 percent of workers over 65 were either unemployed or underemployed – about five percentage points higher than for those ages 25 to 54.
“That is the largest gap since record keeping began in 1948, Mr. Johnson said. And the combined rates are especially high for older workers who are less educated, black, Latino or in certain industries, such as leisure and hospitality, transportation, and education.”
Retirement Plans Impacted by Workplace Health Risks
Although the Centers for Disease Control and Prevention generally warns that adults over 65 are at higher risk of severe illness from the coronavirus, the fact is that healthy older adults – those without underlying health concerns – may be at no greater risk than their younger counterparts, the Times reports. Nevertheless, older workers are typically the last ones returning to a reopened workplace. But this creates another economic crisis. “Most at-risk workers can’t afford to stay away from work for long periods,” says the article, citing one report that pegs average income for workers 65-plus at just under $50,000.
“It’s double jeopardy for older workers as businesses open up,” Kaiser’s Tricia Neuman told the New York Times. “If they return to work, they risk getting seriously ill due to COVID, but if they stay home, they may forfeit their earnings. For older workers who were hoping to work long enough to collect full Social Security benefits, the decision to stay home could have lifetime financial consequences.” The Center for Retirement Research at Boston College reports that roughly 45 percent of senior workers had jobs in 2018 that could be done remotely, but that leaves more than half for whom remote work is not an option. Another analysis quoted by the New York Times predicts skyrocketing poverty rates among today’s 50-64-year-olds due to “pandemic economic shock.”
Retirement Plans May Be Affected by Pervasive Age Discrimination
“Some experts worry about an increase in pandemic-related workplace age discrimination,” the Times reports. The article quotes AARP attorney Laurie McCann, who sounds a dire warning. “Older workers already faced much longer periods of unemployment than younger workers before the pandemic,” she told Mark Miller. “I think that will be on steroids this time — employers will be more reticent to hire older workers who may be more vulnerable to illness.”
“However,” the Times advises, “an employer decision to use age to exclude older workers from returning to the workplace would violate the Age Discrimination in Employment Act.” The Equal Employment Opportunity Commission issued guidelines just a few weeks ago that antidiscrimination laws protect all workers 40 and older, and cover employers with 20 or more workers. Based on that statute, one expert said, “I don’t see much basis to treat older workers as different from younger ones.”
Retirement Plans Need Good Communication and Continual Adjustment
Chances are, you’re not the only one affected by the timing of your retirement: your spouse or partner is along for this ride as well, in more ways than one. Apart from the obvious financial impact of your work status, there’s a huge health concern, since the decision to return to the workplace may not only create infection risk for you but for the one with whom you share a household. Our self-esteem is intricately tied to our employment status, and when that takes a hit your personal relationships can be undermined. Whether or not the pandemic is driving your retirement plans, make sure your significant other knows how you’re feeling.
The timing of retirement can be affected by a whole host of factors, many beyond your control. We encourage you to plan for just about any eventuality by meeting with a qualified financial planner and developing your own financial dashboard to help plan for contingencies. Not every planner offers this important service, so contact us and we’ll recommend a pro who can assist you.
Announcing Seminars with a Choice: In-Person Events Return, Webinars Also Available
For several months our popular LifePlanning Seminars with Rajiv Nagaich have been offered online only. But now as COVID-19 restrictions are starting to be eased, we AgingOptions are excited to announce a new series of in-person seminars coming soon. For now Rajiv will only be offering in-person events in communities where gatherings are permitted under the governor’s phased reopening plan. Of course, these events will be conducted in a way that’s consistent with all health guidelines.
Our chief desire is to help you prepare for the kind of retirement you’ve always dreamed of having. LifePlanning is a powerful process that combines financial planning with a housing strategy, a medical plan, a legal foundation plus a plan to involve your loved ones in all aspects of the choices you make as you age. With finances, housing, medical, legal and family all working together, you have a fully integrated LifePlan.
Because of health safeguards, enrollment at our upcoming in-person seminars will be strictly limited. We urge you to visit our Events Page and register now for the LifePlanning Seminar that works for you. Also, as we said above, Rajiv continues to offer his free LifePlanning Seminars in the form of webinars that you can watch conveniently at home. You’ll find a calendar and other important links here on our AgingOptions website.
Reliable information has never been more important – online or in person! That’s our promise to you at AgingOptions. Age on!
(originally reported at www.nytimes.com)