The COVID-19 pandemic has resulted in an estimated 4 million workers prematurely retiring, according to an economic report released Tuesday by the nonprofit Alliance for Lifetime Income.
Authored by Jason Fichtner, Ph.D., a senior lecturer at Johns Hopkins University’s Paul H. Nitze School of Advanced International Studies, the analysis also finds that almost half (47%) of all retirees retired as the result of employer circumstances, not because they reached a certain age or savings goal, nor because they wanted to pursue hobbies.
Fichtner’s report also focuses on the quickly approaching milestone often referred to as “Peak 65” to describe the point in time when more Americans will turn age 65 than at any point in history, which will occur in 2024.
“The collision of COVID-19 and Peak 65 has only accelerated the pace of retirements,” said Fichtner, who is also a senior fellow at the alliance. “It has created a windfall of early retirements, hastening the impact of Peak 65.”
He added that with pensions virtually disappearing and the emergence of an ultra-low interest rate environment amid the pandemic, it’s difficult for older adults to generate risk-free retirement income.
“Meanwhile, people are claiming Social Security early and missing out on greater income, which is creating a perfect storm of retirement insecurity in America,” he warned. In the analysis, he concluded that as many as 50% of households are at risk of not having enough money to maintain their standard of living in retirement.
In response, Fitchner called on employers to take steps to ensure that their workers have better access through workplace retirement plans to solutions that generate protected income easily and efficiently. He also urged them to consider the use of “trial annuities” as part of workplace retirement plans, to mitigate behavioral hurdles to annuitization and to encourage adoption of proven protected income strategies. And he encouraged employers to make professional financial advice, education and retirement income planning a key workplace benefit.
“With the greatest surge of workplace retirements in history upon us, and our private and public sector retirement systems basically obsolete, there are solutions to solving this crisis, but we must start acting now to avoid that cliff,” Fichtner wrote.