Tom Brady's surprise return to the football field may have stunned sports fans, but perhaps they should have seen it coming. The superstar quarterback's latest move seems to be part of a broader, nationwide play.
‘Unretirement,' that is, retiring and then rejoining the labor force, is catching on among older Americans.
Around 2.6 million Americans left the workforce earlier than expected during the pandemic. Now many of them are wading back into the labor pool.
The portion of retirees taking up work again hit roughly 3% in February, the highest rate since the pandemic first struck in early March 2020.
Economists see several factors ‘at work.' One pull factor is the labor crunch, with desperate employers offering higher hourly pay rates. On the push side, the recent downturn on Wall Street could be hitting retirees' savings.
Improving public health amid higher vaccination rates is another bonus. There is also the widespread availability of remote-work positions. Returning to the ‘office' is much easier without the daily commute, especially if you are past your physical prime.
Yet there is more going on with unretirement. Less new fad than market correction, it could unmask a more profound reality about what the pandemic's ‘Great Resignation' really meant for many older workers.
Forced Retirement
Most senior workers did not choose to retire early during the pandemic but were forced from their jobs, according to a recent study by the Schwartz Center for Economic Policy Analysis.
"While the above-trend retirement rate has fueled the narrative of a ‘great resignation' among older workers, our research indicates that most of these retirements occurred after periods of unemployment rather than directly from employment," said Barbara Schuster, a research associate at the think tank.
Almost 11% of mature-aged employees lost their jobs between March and April 2020. Yet, according to data cited in the report, the national retirement rate hardly rose during that period.
Many stayed jobless. There was a tenfold increase in the number of people who retired involuntarily one year after losing their job compared to pre-pandemic levels.
"We are seeing lots of evidence that employers used the pandemic as a once-in-a-lifetime way to get rid of those expensive older workers," said the Schwartz Center's director Teresa Ghilarducci.
Ageism
It points to the pernicious growth of ageism in the American workplace. According to AARP Research, the problem only got worse during the pandemic, with 78% of older workers reporting having witnessed or experienced age discrimination at work in 2020, a significant jump from 61% in 2018.
Bonnie Rubin is a retired journalist who recently unretired by taking up part-time work as a florist. She said she feels highly valued in her new job after years of marginalization by younger media colleagues. In fact, she finds her analog skills and old-fashioned spelling and handwriting give her an edge in her new low-tech workplace.
"Age discrimination is usually rampant in the workforce - especially against women and most particularly, against women of color," said Julia Pollock, chief economist at ZipRecruiter. "Retirees who return to the workforce now, however, are finding employers desperate for their skills and experience."
Matter of Choice
Choosing to come out of retirement can be empowering, but being forced back to the grindstone to cover rising costs amid dwindling savings is certainly not.
Retirees need a sizeable nest egg. Those who don't have one could be better off padding their social security checks with extra income from part-time jobs.
Which begs the question, how does a fleeting retirement impact one's social security benefits?
"Taking a year or two off may impact your social security payments if you take a job with a lower salary or have trouble increasing your salary in the future," Danielle Miura, a financial planner and founder of Spark Financials, told Wealth of Geeks.
"For those who plan to retire early, I suggest making sure you meet the minimum requirement to receive social security payments," Miura added. "If you take your social security benefits at age 62, your benefit amount will be lower. However, you will be able to receive payments for a longer time frame."
Dr. Brandon Renfro, a financial planner at Belonging Wealth Management, crunched some numbers on this.
"Filing then (at 62) will reduce your benefit by up to 30%. To put that into dollars, that means for every $1,000 you would be getting, you'll only get $700," Renfro told Wealth of Geeks.
"For every year you wait after your full retirement age, your benefit goes up by 8%," he said. "Using this example, the difference between filing at 62 vs. 70 is $700 vs. $1,240. That's a 77% increase!"
Yet social security and employees' 401(k) plans might get a lot better thanks to the new Secure Act 2.0, which the federal government is currently reviewing.
The updated act will change how much older workers can contribute to their 401(k) as they approach retirement. The ceiling for catch-up contributions will be raised from $6,500 to $10,000 for those aged between 62 and 64.
It will also increase the starting age for required minimum distributions (i.e., the minimum annualized amount that must be withdrawn) up from 72 to 73 in 2022, 74 in 2029, and 75 by 2032.
Could the Secure Act 2.0 nudge those sitting on the fence back into retirement?
It's too early to tell, but as the unretirement phenomenon shows, predicting the pandemic's after-effects on the labor market is no mean task. Moreover, with so much still in flux, the ‘new normal' is certainly not the same for everyone.