The past couple of years have been trying with the COVID-19 pandemic and everything related to that. It has changed many people's mindsets after going from working in an office to home to somewhere in between for many of us.
A lot of people have felt the rush to retire. That is completely understandable in today's environment.
So I have a question for you: Has the COVID-19 pandemic caused you to reevaluate your life and consider early retirement? If so, you’re not alone.
Today I’m going to talk about a Bloomberg article called Affluent Americans Rush to Retire in New ‘Life-Is-Short’ Mindset. The article talks about how more Americans are considering retirement now because of COVID-19.
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About 2.7 million Americans aged 55 and over are thinking about retiring earlier than they had originally planned due to the pandemic. Reasons include strong retirement accounts, after the government pumped a lot of money into the economy last year and again this year, and now people have “COVID-19 fatigue.”
Home values and stock prices are soaring during this economic crisis, making it easier for those with significant investment accounts to consider retirement.
This is different from how less affluent Americans are experiencing the pandemic. Those workers may have had to delay retirement because they lost their jobs during the pandemic.
Or they may have gotten discouraged with their work situations and retired before they were ready.
Early Retirement is Contributing to Labor Shortages
I'm sure you have noticed labor shortages if you go to a restaurant or similar business as many small businesses are having to close a few days a week to deal with the lack of employees.
These early retirements, whether chosen or forced, will impact economic recovery. Older workers generally provide higher productivity and lower absenteeism than newcomers.
We depend on these experienced workers to train the newer workers. Plus, older workers tend to be strong in the soft skills that come from experience and can’t easily be taught.
Early retirement is contributing to labor shortages reported by many companies.
Rethinking Priorities During the Pandemic
Going back to the office is a tough transition for workers who spent months working from home and meeting over Zoom. Plus, travel is picking back up for jobs that had previously included mandatory travel, but not everyone wants to go back to that level.
Some people might have been gone 3 or 4 days a week and they got used to being home and they don't want to go back to that.
For example, a 58 year-old 3M executive retired in March 2021 to pursue volunteer work and other passions.
He had a scare with cancer 5 years ago that made him question the importance of climbing the corporate ladder. Working from home for a year during the pandemic reinforced those feelings.
As another example, a 58 year-old supervisor for the Massachusetts Department of Conservation and Recreation retired this year about 5 years earlier than planned.
Part of her job was to hire hundreds of seasonal lifeguards each spring, but she was working more with less because the seasonal administrative staff that helped screen candidates was cut.
Her husband is also retired, and she will be taking a smaller pension payout by retiring early, but their combined retirement accounts have grown so much that she says “we’re going to be in the green until I am 92.” (Obviously they worked with a financial advisor and they worked out the numbers.)
Even at my own firm, Eagle Ridge Wealth Advisors, I have had clients and prospective clients tell me they want to enjoy their life while they are still young.
- Investment assets for Americans aged 55-69 rose by $4.2 trillion in 2020.
- Real estate values for the same age group rose by $750 billion in 2020.
- The number of people expecting to work beyond age 67 fell to a record low, to just under 33%, according to a New York Federal Reserve survey.
- The number of business owners who say they plan to retire sooner than expected has doubled from early 2010 to August 2020, according to a Wilmington Trust survey.
Early retirements are especially a problem in healthcare where more than one-third of physicians are over age 60.
Teachers are feeling record levels of burnout, threatening shortages in education.
Some Personal Thoughts
This newfound early retirement freedom can be great for those experiencing it. Life is short and we should fully enjoy it!
You definitely want to have a plan and contingencies for if and when things happen in the markets and to your nest egg. I recommend having a written retirement plan to help guide you.
I also recommend taking a practice retirement before you actually retire. This can help you get a feel for retirement and help you build retirement routines. This trial run will also show you if you are mentally and emotionally prepared for retirement.
Many people considering retiring early have already experienced somewhat of a practive retirement with working from home and having their work and personal lives thrown into something they were not used to.
So how about you? Have you been thinking of retiring early? If so, what have you been doing to prepare?