The voices of Urban Institute's researchers and staff
October 7, 2011

Retirement Isn’t Dead Yet

October 7, 2011

In the saga of the US financial crisis, usually one chapter recounts how the stock-market and housing crashes ended retirement. As trillions of dollars in retirement savings and housing wealth disappeared, who could afford to stop working? This story rings true, and most older workers surveyed say they plan to keep working long after they “retire.”

It turns out, though, that reports of the death of retirement are greatly exaggerated. Older workers, our new analysis shows, were more likely to retire between 2008 and 2010 than in any earlier two years in the past decade. Using data on older Americans from the Health and Retirement Study, we find that 17 percent of employed adults age 62 and older in 2008 had stopped working and described themselves as fully retired in 2010. Between 2006 and 2008, only 15 percent of older workers retired.

These results may contradict conventional wisdom, but they shouldn’t surprise us. As this morning’s unemployment report reminds us, working into old age, even if you’re healthy, isn’t in the cards for all when jobs are scarce. Fourteen million Americans are unemployed four years into the recession. Yes, older workers are less likely to be pink-slipped than younger workers, but the brutal job market hasn’t spared seniors. Today, the unemployment rate for adults age 62 and older is about twice as high as it was four years ago. And when older workers lose their jobs, they take about twice as long as younger jobless Americans to find work.

If you dig deeper, however, you find—as the figure here shows—that college grads aren’t retiring early. Their two-year retirement rate held steady between 2004 and 2008 while increasing 2 percentage points for high school drop outs and 3 points for high school grads. Partly that’s because college grads had enough savings to feel the stock market crash while most lower on the education ladder didn’t. Not only did they resist retirement when jobs became scarce, college grads were also less likely than those without BAs to lose their jobs during the recession.

Percentage of Workers Age 62 and Older Retiring Over a Two-year Period, By Education and Year

This retirement surge may hearten younger workers by freeing up jobs in the weak economy, but it’s bad news for seniors. Workers pushed into early retirement earn less and save less and must make their nest eggs  last longer. And if they claim Social Security benefits early, their income is permanently reduced.

End of story? Not at all. We’ll keep tracking these reluctant retirees to see how they fare in the recession.

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