- Nearly half of Americans expect to retire before turning 62, according to the New York Fed.
- Retiring earlier lets Americans use their “golden decade” for better financial planning, potentially saving thousands of dollars in post-retirement income.
- But the economy heavily depends on older workers, and a shift to early retirement could upend the labor market.
- See more stories on Insider’s business page.
Americans plan to retire earlier than ever.
Just 50.1% of Americans expect to work beyond age 62, according to a July survey conducted by the Federal Reserve Bank of New York. That’s down from 51.4% in March and marks the smallest share since the Fed’s survey began in 2014.
Conversely, the reading means nearly half of US adults plan to retire before turning 62 years old. The share of Americans expecting to work beyond 67 also fell in July to a record low 32.4% from 32.9%.
This could be good news for workers, but presents challenges for the American economy.
3 reasons Americans are retiring early
More than one million older workers have exited the workforce since Covid struck the US in March 2020. Factors driving the mass exodus – deemed the “Great Resignation” by psychologist Anthony Klotz – vary.
For some, the risk of catching the coronavirus countered the desire to keep working. Roughly 1.5 million Americans cited Covid-19 as the main reason they stayed out of the labor force in August. That count held flat from July levels.
Others likely stayed unemployed due to a lack of attractive employment options. The biggest labor shortages are in the service industries that took the biggest hits during the pandemic. It’s possible older workers balked and decided to retire early, Julia Pollak, a labor economist at job site ZipRecruiter, told Insider’s Juliana Kaplan in July.
Soaring stocks also made more people rich enough to retire. The number of 401(k) and individual retirement accounts holding at least $1 million soared to a record 754,000 in the second quarter, Fidelity said in an August report, up 75% from the year-ago level.
For all workers, the average 401(k) balance rose 24% to $129,300 from the year-ago period, Fidelity said. The average IRA balance climbed 21% to $134,900.
The latest Fed data suggests early exits are the new normal, not a pandemic-era oddity.
Unlocking the ‘golden decade’
The wave of pandemic retirements stands to overhaul the US economy.
For one, it freed up younger baby boomers to better enjoy their 60s (the oldest boomers turned 75 in 2021). The decade already covers the most common retirement ages, but it also serves as the “golden decade” for tax planning, according to tax experts at Aspire Planning Associates, because it’s old enough to retire and young enough to plan ahead to reduce tax costs.
Early retirements could also relieve some pressure on the labor market and force employers to shift their focus toward younger workers, as employers have grown increasingly reliant on older workers over the past two decades. While employment has been almost flat for workers younger than 55 since 2000, it’s grown by nearly 20 million employees for Americans 55 and older, according to the Bureau of Labor Statistics. Simply put, the US economy was increasingly reliant on workers less than a decade from the average retirement age.
The graying of the workforce is another piece in the puzzle of an America revealed by the 2020 census to be having fewer babies, with fewer workers around to power the economy. With Americans less likely to work into their 60s and instead take advantage of the golden decade, employers will have to look elsewhere for workers.
The search is already taking place. Job openings rose to 10.9 million in July, marking a fifth consecutive record high. That came despite the US adding 1.1 million payrolls that month, suggesting businesses are still struggling to rebuild their workforces. Employers will just have to find ways to get younger workers to do the jobs of older ones -or robots will have to pick up the slack.