Why some Boomers are Feeling Forced to Retire

[We’re pleased to welcome Matthew S. Rutledge, a Research Economist at the Center for Retirement Research, Boston College. Rutledge recently published an article in the ILR Review entitled “How do Financial Resources Affect the Timing of Retirement after a Job Separation?” From Rutledge:]6355844351_9ac538c7e6_z.jpg

This paper came out of an effort to grasp the plight of older workers in the Great Recession (as part of a grant funded by the Social Security Administration).  Older workers really faced a much different labor market in 2008-2011 than they had even in other recessions – the decline of long-tenured jobs and the move away from structures like defined benefit pensions that encouraged workers and employers to stay together for a long time helped make these workers much more vulnerable than they ever had been.  Their unemployment rate soared to unprecedented heights.  Remember that the unemployment rate only includes workers who are actively looking for a job, and part of the reason that it never got that high for older workers in the past is that they would bail on the labor market when times got tough.  This time, though, we were seeing them holding out hope for a new job, which made the unemployment rate skyrocket.  So I, along with my colleagues at the Center for Retirement Research, were looking to understand what factors would encourage them to keep looking, and what factors would enable them to stop looking and just retire.

Basically, this paper finds that all of the resources that could help sustain a long job search – pension wealth, Social Security (which doesn’t imply retirement), other financial wealth – instead were more likely to enable faster retirement, and the people that held out simply lacked these resources (or were still receiving unemployment benefits, which essentially requires them to keep looking).  This result isn’t all that surprising; once workers reach their 50s, it’s much easier to retire than try to find a job, especially when previous studies emphasize that older workers have much more trouble finding a new job for a variety of reasons.  What *was* surprising was that this decision has little to do with labor market conditions.  I expected that when the unemployment rate was high, people would leave the labor force sooner, especially if they had these resources.  But that was never the case, no matter how I cut the data; in some cases, it actually went the other way – a higher unemployment rate was associated with *slower* retirement, and I don’t have a good story for why that would occur (but it only seems to happen with some cuts of the data, so it might just be statistical noise).

I hope this paper helps us understand a bit more what motivates jobless older individuals to keep looking for work, and come to grips with how disheartening the experience of losing your job just before retirement can be.  I worry that with Social Security and pension wealth both helping people less due to financial concerns, and with a stagnant labor market for many workers, that job searches are only going to get longer – not because people are hopeful of recovering, but because their finances give them no choice.

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Retirement photo attributed to 401kcalculator.org. (CC)

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