Older workers may have every intention of deciding when they’ll retire, but economic conditions can undermine their well-laid plans.
A new study investigating whether macroeconomic events “leave workers with less control over their retirement timing” found that various transitions from career jobs into retirement sharply accelerated during periods when more Americans, including more older workers, were losing their jobs.
The researchers analyzed whether periods of rising unemployment over the past 50 years have affected three specific retirement transitions made by older workers: 1) from full-time work to “bridge jobs,” which pay less; 2) from bridge jobs to full retirement; and 3) from full-time work to full retirement.
These transitions were tracked based on changes in individuals’ employment earnings documented in U.S. Social Security Administration data from 1960 through 2010. An individual was considered to have shifted to a bridge job after he experienced at least a 50 percent decline in his earnings with an existing or new employer – the earnings floor on this group was $5,000 per year. When earnings fell below $5,000, the worker was considered fully retired.
The researchers said that they focused on white men between the ages of 55 and 75, because their labor force participation patterns were more stable during the period studied than those of women and minorities.
They found that a 1-percentage-point rise in the U.S. unemployment rate increased the number of men moving each year from full-time work to bridge jobs by 7 percent.
Rising unemployment also pushed more men into full retirement. A 1-percentage-point rise in the unemployment rate increased the number of men who retired – either from full-time work or from a bridge job – by 5 percent each.
When they investigated whether the retirement timing of high-income Americans might be less vulnerable to economic conditions, they found very little difference among various groups on the income ladder.
Even when individuals carefully prepare for their retirement, a downturn can quickly disrupt their plans.
Full disclosure: The research cited in this post was funded by a grant from the U.S. Social Security Administration (SSA) through the Retirement Research Consortium. The opinions and conclusions expressed are solely those of the blog’s author and do not represent the opinions or policy of SSA or any agency of the federal government.
Boston College Center for Retirement Research