High Inflation Pushing Retirees Back Into the Workforce

Rising inflation and recession fears has many retirees considering a return to paid work. Studio Romantic/ShutterStock

Since the beginning of this year, many Americans have been returning to the workforce in response to a massive rise in prices due to high inflation.

Many Americans Lost Their Jobs Due to Pandemic

During the pandemic, millions of Americans have quit their jobs, have been fired due to lockdowns or mandates, or have retired early, in what has come to be known as the Great Resignation.

According to the United States Social Security Administration Retirees who are already receiving Social Security benefits have not been affected by the pandemic, but those who have quit their jobs or lost them due to lockdowns may find that they will be ineligible for benefits.

After the economy started to recover last year, the labor market began to tighten. Some gave up working altogether, while 47.4 million other people left their jobs for better opportunities, a record high, according to data from the Bureau of Labor Statistics.

Employment Rate and Pandemic

The pandemic has also affected the number of people who are working. In November, the unemployment rate was at 3.7 percent, which some economists consider to be full employment.

Meanwhile, employers were forced to increase salaries, offer signing bonuses, and allow employees to work from home in order to retain or recruit talent, as labor shortages grew nationwide.

However, the spike in salaries and bonuses hasn’t kept up with the rise in inflation.

At the same time, the current economic situation regarding the rising cost of living is leaving many on fixed retirement incomes to rethink their decision to leave work.

There is another aspect of the labor market that has been overlooked by many economists: the impact on older workers. In addition to the rising costs of living, there are other factors at play that have led people in their 50s and 60s to reevaluate their life plans.

Recession Predicted

U.S. inflation is at a near four-decade high, at 8.5 percent, down from the high of 9.1 percent in June, which has provided little relief for consumers.

More economists are predicting an imminent recession, after U.S. gross domestic product contracted for two straight quarters, while the housing market has tumbled, a sign that general economic growth has slipped.

Many older workers are feeling the strain as they try to keep up with the rising costs of living. They are often among the first to be laid off, and they have less time than their younger counterparts to find another job amid a tough economy.

Core inflation dipped for a bit, only to accelerate again in recent months, and even if price increases continue to slacken, they are a long way from the Federal Reserve’s annual inflation target of 2 percent.

Retirees Returning to Work and Inflation

Retirees returning to work is a sign of inflation. When the economy is strong, retirees are more likely to return to work because they have some extra income. This means that the economy is doing better and there are more jobs available for them.

Twenty-dollar bills are counted in North Andover, Mass. Elise Amendola/AP Photo

At least 68 percent of people who retired during the pandemic have said they would consider going back to work, according to a June CNBC survey.

Some of these retirees may be able to return to their old jobs, but others will have no choice but to start looking for work again. The U.S. Bureau of Labor Statistics estimates that the number of job openings will hit 5 million by 2022, which is nearly double what it was in 2009.

The survey also reported that 94 percent of those who left the workforce but never technically retired would do the same.

It also found that 33 percent of retirees left the workplace for health reasons, 27 percent retired due to pandemic concerns, and 19 percent said they no longer wanted to work.

Many retirees are now saying that they are feeling anxious after spending decades in the workforce or running a business, according to Michael Liersch, the head of wealth and investment management advice and planning at Wells Fargo.

“Any type of change that you make can be perceived as a loss because you’re giving up something to go to something else,” Liersch said in an interview with Fox Business.

The fear of a looming recession is also making many retirees look at their retirement stock portfolios with dread.

“If you are paying 2.5 percent or even more in ongoing fees, it’s like punishing your retirement pot with a double dose of inflation,” Robin J. Powell wrote in his blog “The Evidence-Based Investor.”

Americans aged 55 and older, including many early retirees, are now looking for employment or have already returned to work in growing numbers, higher than the pre-pandemic average, according to the St. Louis Federal Reserve Bank.

That’s because of the recession’s impact on jobs, and also because of the longer-term trend of aging workers delaying retirement. More than half of people between 55 and 64 are working or looking for work now—a higher proportion than before the Great Recession, according to the Federal Reserve Bank of St. Louis.

About 3.2 percent of workers who retired a year earlier are now employed as of July.

From 2017 to 2019, about 3 percent of retired workers on average had a job a year after their official retirement.

Some retirees, according to Liersch, have decided to go back full-time, either with their old firm or a new one, although some returnees may be “leveling down” their status with their former employers, such as doing hourly consulting work.

An estimated 1.5 million would-be retirees have already returned to the workforce, according to Labor Department data.

The present rate at which retired employees are returning to work remains elevated, Nick Bunker, the head of economic research at Indeed, told Fox Business.

The Labor Department data show that the number of retirees who have returned to work has risen steadily since 2000. That trend is likely to continue as long as there are jobs available and older Americans are healthy enough to work.

The Labor Department on Aug. 5 reported that in July, U.S. employers added 528,000 jobs, which was higher than expected, while the U.S. unemployment rate fell to 3.5 percent, the best level in about half a century.