Inflation, Stock Market Meltdown Force More Retirees to ‘Unretire’

A 'Now Hiring' sign is posted at a Home Depot store in San Rafael, Calif., on Aug. 5, 2022. Justin Sullivan/Getty Images

The Great Resignation or the Great Unretirement?

A growing number of older Americans are “unretiring” as a cost-of-living crisis, a bear market on Wall Street, and rising interest rates send more people back to the labor market under the stress of diminished living standards.

During the COVID-19 public health crisis, the U.S. economy witnessed a retirement boom, with approximately 4.2 million people exiting the workforce during the first 18 months of the coronavirus pandemic.

At the time, it might have made sense to begin an early retirement of, say, fishing and sleeping in late.

After the U.S. government and the Federal Reserve injected trillions of dollars into the marketplace, investment portfolios skyrocketed. Price inflation was much lower than it is today, while the pandemic-induced lockdowns allowed many households to amass between $2–4 trillion in pent-up savings.

This year, economic conditions have drastically changed.

The Consumer Price Index (CPI), a measure of inflation, is north of 8 percent, while grocery store prices have surged about 14 percent. A gallon of gasoline is around $3.70, and utility bills are climbing. U.S. household wealth plunged by about $6 trillion in the second quarter, and more consumers are taking on more debt. The Dow Jones Industrial Average and the Nasdaq Composite Index are down 15 percent and 27 percent, respectively.

According to Alicia Munnell, the director of the Center for Retirement Research at Boston College, Americans lost $1.4 trillion in their 401(k) accounts and an additional $2 trillion in their individual retirement accounts (IRAs).

Heading Back to the Office

In this new economic landscape, many retirees are choosing to “unretire,” as roughly 1.7 million workers have returned to the job market, according to Department of Labor data analyzed by Indeed.

People attend a job fair put on by Miami-Dade County and other sponsors in Miami, Fla., on April 5, 2019. Joe Raedle/Getty Images

The Bureau of Labor Statistics (BLS) projects that labor force participation among older adults will increase over the next decade. Researchers forecast that 40 percent of 65- to 69-year-olds will be in the labor force by 2030, up from 30 percent in 2020.

Others are starting to reconsider their retirement options.

A recent CNBC All-America Workforce Survey learned that more than two-thirds (68 percent) of retired workers would consider returning to work.

A July survey from personal finance software maker Quicken revealed that nearly half (48 percent) of those who planned to retire this year are reconsidering or putting their retirement plans on hold. One-quarter of respondents aged 58 to 74 who were not planning on retiring this year are now delaying retirement even further out. Reasons vary, from rising interest rates to a decline in the stock market to growing inflationary pressures.

An American Staffing Association (ASA) poll found that about one-third of retirees would consider rejoining the labor market if inflation continues to eat into their savings.

“Many retirees rely on a fixed income from their pension plans or Social Security checks in order to pay for basic living expenses, such as food, shelter, and clothing,” Brian Greenberg, the CEO and founder of insurance services firm Insurist, told The Epoch Times. “When these fixed incomes become insufficient to cover these costs, many retirees will look for additional sources of income in order to make up for any shortfall.” 

This could consist of returning to work full-time to receive health benefits, finding part-time employment opportunities, or locating odd jobs, such as babysitting, he added. 

But while financial aspects are notable drivers of older Americans ditching retirement and heading back to work, many also miss everything else associated with work, says Joe Casey, a managing partner of Retirement Wisdom and former vice president at Merrill Lynch.

“I asked people who are retired and they say, ‘I miss the people’ and ’the places that made me step out of my comfort zone,'” he told The Epoch Times, adding that they wanted also to stay sharp and offer some level of contribution.

Many also consider going into careers or adapting to workplace changes while also being enticed by flexibility and higher pay.

“And I have had people change careers and actually enroll in intense coding boot camps,” he said.

So, is it skyrocketing inflation or the lure of the red-hot labor market offering higher wages and flexibility amid tightness?

“It could be the fear among Americans that inflation would continue to deal a blow to retirement savings, and cost-of-living adjustment to Social Security benefits would not be enough,” Kunal Sawhney, CEO of equity research firm Kalkine Group, told The Epoch Times. “Even though indicators like the BMO Real Financial Progress Index suggest Americans are delaying their retirement, this space has to be examined when we know the exact numbers.”

What About Social Security?

Despite Social Security keeping up with overall inflation, the surging cost of living has eroded 40 percent of the retirement scheme’s purchasing power.

It is currently estimated that roughly 70 million retirees will receive next year an 8.7 percent cost-of-living adjustment (COLA) in Social Security benefits, the largest in four decades. This means seniors could get an average boost of $144.10 per month, or roughly $1,729 per year, in 2023, according to the nonpartisan Senior Citizens League.

The problem some financial experts assert is that the program does not accurately reflect seniors’ spending habits.

However, in August, the CPI for Urban Wage Earners and Clerical Workers (CPI-W) advanced 8.7 percent. But this measurement maintains a greater weight on gasoline and transportation costs, which are more common for workers. Retirees are more affected by rising food, health care, and housing costs.

“That’s the deepest loss in buying power since the beginning of this study by The Senior Citizens League in 2010,” said Mary Johnson, a Social Security policy analyst for The Senior Citizens League, in a statement. “Retirees know all too well that Social Security benefits don’t buy as much today as when they first retired.”

Grocery store prices spiked 13.5 percent year over year in August, shelter costs surged 6.2 percent, electricity prices climbed 15.8 percent, and medical care services swelled 5.6 percent.

Whether Social Security or another form of fixed income will be sufficient enough or not depends on your overall cost of living, Greenberg noted.  

“If they’re high, then a supplemental income will probably be necessary,” he said. 

Ultimately, as price inflation becomes sticky and entrenched in the broader U.S. marketplace, it might be a challenge to survive on Social Security benefits in today’s economic climate.