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Quitting Retirement

Mike Zaccardi

DRIVING PART of the nation’s labor shortage is a wave of early retirements dubbed the “Great Resignation.” A red-hot housing market and booming stock market have made it financially easier for many to quit traditional nine-to-five employment, as has employers’ embrace of part-time, work-from-home positions. Add to that virus concerns and parents’ difficulty finding child care, and you’ve had a perfect storm for the labor market.

According to a recent article in The Wall Street Journal, those exiting the labor market weren’t your typical job-quitters and job-switchers. The article notes that the Federal Reserve Banks of Kansas City and Dallas concluded there are 1.5 million more retirees as of April 2021 than would have been expected, assuming pre-pandemic retirement rates had simply continued.

These early retirees face a problem, however: inflation. The Consumer Price Index (CPI) currently runs at a spicy 6.2%. Analysts see inflation averaging near that rate through much of 2022’s first half. CPI is not only remarkably high, but its increase has also outpaced most economists’ forecasts for 2021.

I wonder if higher-than-expected inflation might nudge some early retirees back into the workforce next year. Sustained higher living costs, coupled with a longing for the camaraderie of the office social scene, could prompt some folks to call it quits… from calling it quits.

Early retirees, those younger than 62, can’t count on Social Security—which is indexed to inflation—to help protect their purchasing power. Owning inflation-sensitive assets like stocks, inflation-indexed Treasury bonds, real estate and commodities can soften the blow. But all those asset classes can drop in unison, too—as they did in late 2008 and early 2020.

I’m one of those workers currently on the sidelines, ready to jump back into the game. I’ve been successfully running my own business this year after leaving the corporate world in January. I’d like once again to have the structure that a fulltime job would bring to my day-to-day work life—and I certainly don’t like seeing inflation eat away at the purchasing power of my savings.

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Jerry Pinkard
Jerry Pinkard
11 months ago

Good article with some interesting points. Many early retirees may not immediately feel the impact of inflation. It may take a few years to appreciate inflation’s effect on retirees.

Mik Cajon
Mik Cajon
11 months ago

Comparing 2021 to 2020 it’s hard to comprehend how the usual suspects created so many problems so fast?

Last edited 11 months ago by Mik Cajon
parkslope
parkslope
11 months ago

I found it interesting that early retirement increased among those without a college degree but decreased for those with a degree. As the article noted, many of those with less education are financially ill-prepared for retirement.

A higher share of workers without a college degree retired before the traditional retirement age of 65 compared with those who had a college education, according to the Retirement Equity Lab. The lab’s analysis of census data found that retirement rates for those ages 55 to 64 without a college degree rose by 0.8 percentage point from 2019 to 2021, compared with a decline of 0.6 percentage point for similarly aged workers with a degree.
https://www.wsj.com/articles/covid-19-pushed-many-americans-to-retire-the-economy-needs-them-back-11635691340

Kevin Maher
Kevin Maher
11 months ago
Reply to  parkslope

I’d wager that the chances of a non-degreed person having a job they hate is greater than a degreed person

Mike Zaccardi
Mike Zaccardi
11 months ago
Reply to  parkslope

I think they are being overly optimistic (the younger crowd retiring). I learned through hard experience that you MUST retire TO something, not from something. And I knew that going in, but still failed to fill my time well. I mean, I increased my exercise, reading, sleep, sunshine, but that wasn’t enough. Social connections are soo important.

parkslope
parkslope
11 months ago
Reply to  Mike Zaccardi

I enjoy reading about your views about the non-financial challenges of early retirement. I hope you are able to find the type of work situation that you are looking for.

Mike Zaccardi
Mike Zaccardi
11 months ago
Reply to  parkslope

Thank you! It’s been an interesting journey.

R Quinn
R Quinn
11 months ago

I agree. I think many of the early retirees or wantabes – many in their fifties- are overly optimistic or simply naive not only about inflation but what can happen over the next 30-40 years.

Mike Zaccardi
Mike Zaccardi
11 months ago
Reply to  R Quinn

Barring something crazy, I’ll be working full-time again in a few weeks. But still keeping my freelance writing business. Call me crazy, but I like a little structure imposed on me from a job. And the cash and benefits. I’m a little risk-averse in that way, I guess.

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