Oct 29, 2021 - Economy

Millions of baby boomers retired early during the pandemic

Percentage of monthly retirees
Reproduced from Miguel Faria e Castro and the Federal Reserve; Chart: Axios Visuals

The pandemic pushed more than 3 million baby boomers into premature retirement, according to a new analysis from Miguel Faria e Castro, a senior economist at the St. Louis Fed.

Why it matters: The wave of early retirements is contributing to the labor shortage that's roiling the U.S. economy.

What's happening: Many older workers faced layoffs, and others left the workforce to protect themselves from the risk of infection.

  • It's much harder for workers in their 50s and 60s — or older — to re-enter the workforce after a period of unemployment, due to persistent ageism in corporate America.
  • So it's likely that many of those who left jobs got discouraged and chose to retire instead.

Older workers also may have built up a financial cushion during the pandemic and chosen to retire, Faria e Castro notes.

  • "The COVID-19 recession was abnormal in the sense that it featured a sharp downturn in real economic activity but also rising asset values, such as for housing and stocks," he writes. That may have made early retirement possible for many.

The big picture: The early retirement wave isn't the only trend chipping away at labor force participation. The total number of people who left the workforce during the pandemic — including the 3 million early retirees — is around 5.25 million, per Faria e Castro's analysis.

  • That includes working mothers who left jobs to care for kids and immunocompromised people who stayed home from work for their health.

What to watch: That 5.25 million number could shrink significantly as pandemic-era factors keeping people out of work go away. Some early retirees could also come back to the workforce.

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