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.