The Pandemic’s Impact on the Decision to Retire

A recent Center for Retirement Research (CRR) at Boston College study examined how the pandemic has impacted a workforce demographics pattern seen before COVID-19—namely, people seeking to work longer and claim Social Security later to improve their prospects for a secure retirement.

In its “How Has COVID-19 Affected Older Workers’ Labor Force Participation?” study, the CRR finds that the rate of workers leaving the workforce has changed since the start of the pandemic. Before the outbreak, about 15% of older workers—those ages 55 and over—would leave the workforce in a given year. That percentage rose sharply as of April 2020, reaching 31.5%.

In the following months, a lower percentage of older workers left their jobs, but the percentage remained near or above 20% during the rest of 2020. Overall, the share of those 55 or older who left the workforce during the pandemic increased by 7.6 percentage points.

Before the start of the pandemic, the study says, the probability of leaving of leaving employment increased with age, such that 10% left between the ages 55 and 59 and 25% left at ages 70 or older. After the onset of the pandemic, most of the age groups saw a substantial percentage point increase in the share of individuals leaving the workforce.

The CRR study finds that the effects of the pandemic varied across gender and racial groups. Women saw an 8 percentage point increase in those leaving work, compared with a 7 percentage point increase for men. Most racial groups saw an increase of seven to eight points, but the increase among Asian Americans was 13 percentage points.

For those ages 55 and older, leaving the workforce is usually (but not always) coupled with the active decision to retire, the study says. But the pandemic was not associated with a large increase in the share of older workers who report being out of the workforce due to retirement. Rather, that percentage remained largely flat. The average retirement rate before the pandemic was 12%, and it increased to 13% post-pandemic. There was one exception, as those ages 70 and older were 5.9 percentage points more likely to leave work via retirement during the pandemic. Since this group was likely already receiving Social Security, benefit claiming did not increase as much.

On one hand, employment exits among workers over age 55 dramatically increased during the pandemic, especially for those with less than a college degree and those whose occupations were less likely to allow to remote work, the study shows. On the other hand, self-identified retirement increased only slightly over the past year and was concentrated among those over age 70. Meanwhile, the study said the pandemic had little impact on Social Security claiming.

The study says the discrepancy between the numbers leaving work and retiring can be interpreted in two ways. Some older individuals may intend to return to work to the extent that the pandemic continues to recede, and vaccination and other medical advances make doing so safer, or they may not intend to return to the labor force but are using other sources of income—such as extended unemployment insurance or federal stimulus payments—to postpone claiming Social Security.