Why do fewer Americans think they’ll be working past age 62?
A surprising thing happened in the pandemic and its aftermath. Older workers left jobs in high numbers. That also happened to younger workers, initially.
But Labor Department data indicates more older workers stayed out of the workforce and never came back — retiring early and permanently. Labor force participation for workers 65 and up remains lower today than it was before the pandemic. For younger cohorts, it has fully rebounded, and in some cases now exceeds pre-pandemic levels.
Meanwhile, new analysis from economists at the New York Federal Reserve found American workers’ expectations of the age at which they’ll retire from full-time work have fallen compared to before the pandemic.
The analysis is based on the New York Fed’s Survey of Consumer Expectations. In surveys going back to 2014, researchers asked respondents if they think they’ll still be working full-time when they’re age 62 and age 67.
In the past 10 years, the percentage who expect to work past 62 has fallen by 10 points to approximately 46%. Expectations of working past 67 have declined to a smaller degree. Expectations of working into one’s 60s have declined the most for women and lower-income workers.
“And I hope you’re not going to ask me why it occurred, because I have no idea,” said Alicia Munnell, who directs the Center for Retirement Research at Boston College. But Munnell actually did have a few hunches, which she laid out in a blog post in response to the NY Fed economists’ paper.
First, she said, there’s been a “wealth effect.” Generous government pandemic benefits, followed by a soaring stock market and home prices, led more people to retire early voluntarily.
“They had accumulated some wealth,” said Munnell. “We had a bad stock market year in 2022, but pretty good in 2023 and really good in 2024. So, they were feeling rich and felt like they just didn’t need to work any longer.”
There’s also been a rise in involuntary early retirement: people leaving jobs for health or safety reasons during the pandemic and being unable or unwilling to come back to work. In fact, said Munnell, “surveys show that people expect to work longer than they really do. They end up getting sort of moved out, or they have a health issue, or their spouse has a health issue.”
All these factors were behind Julie Michaels’ decision to retire about five years ago. She’s now 61.
“I was a public health policy analyst,” said Michaels, sitting in her well-appointed craftsman home in Portland, Oregon. “I ended up retiring early because of health reasons, and then went back to work part-time, and then decided to completely retire when the pandemic happened.”
At that point, Michaels and her husband, Doug Honnold, now 70, moved from the Bay Area to be closer to family. They’ve just welcomed a new grandchild.
Initially, Michaels didn’t want to fully retire.
“I do volunteer work — childhood grief work — that I enjoy,” she said. “But I thought when we moved here that I would find other part-time work, and that just didn’t happen. Moving to a new city, I just didn’t have the connections, the network. I’m not using my professional skills, and I miss contributing to the work.”
After Michaels stopped working, there was a period when no paychecks were coming in. Honnold had also retired early from a stressful, high-profile job as a senior attorney for Earthjustice, the legal defense fund for the Sierra Club, where he litigated cases on endangered species and wilderness protection.
“It was very challenging for us financially,” he said. “We had probably four or five years where we had to cut back on our expenses and think: ‘How do we make this work in the short term, because we need to get to the point where we have income from Social Security.’”
When retiring early, “there’s no magic financial number,” Honnold said. “I was religious about funding my 401k. I had the family farm I grew up on, that helped out. But even with all of that, there were many months where we didn’t know if we could make the mortgage payment.”
And the couple’s retirement savings were basically in good shape. Most Americans’ aren’t.
“Over 50% of people who approach retirement age don’t have enough money to maintain their living standard,” said Teresa Ghilarducci, chair of economics at the New School and an expert on retirement finance. Ghilarducci said half of U.S. workers have no savings in a personal retirement account, such as a 401k or IRA.
Ghilarducci thinks a lot of folks who retired during the pandemic weren’t ready.
“Many older people who eventually retired passed through a period of unemployment, which revealed that much of their so-called ‘retirement’ was involuntary,” she said.
And what does Ghilarducci make of the New York Fed economists’ finding that more Americans now expect to retire early, by age 62?
“Even though they know that they don’t have enough money, they also know — especially after the pandemic — that the labor market often doesn’t want older people, especially those without college educations,” Ghilarducci said. “And older women seem to have a lot more difficulty than older men.”
Meanwhile, retirement age can be a moving target.
Alicia Munnell at Boston College planned to retire when she was 65. But she’s still running the Center for Retirement Research at age 82.
“Because it’s fun,” she said. “I like it. I care, also. I want a good retirement system so people after a lifetime of work can retire with dignity.”
And Munnell said for most people, if they’re able, working at least until age 67 when full Social Security benefits typically kick in, will make for a financially healthier retirement.