Axios Markets

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Good morning. If you're unsure what day of the week it is, maybe that's because you're happily retired.

  • Many people are joining that club, as Felix writes below.
  • If you're still employed, and don't have much time to spare, this 938-word newsletter will take just 4 minutes to read.

1 big thing: The retire-early economy

A line chart that shows the percentage of Americans who believe they'll work past 62 from November 2015 to March 2024. The percentage fluctuates between 46% and 58% over the period. A general downward trend is observed, with the highest point at 58% in November 2015 and 2016, and the lowest at 46% in March 2024.
Data: New York Fed; Chart: Axios Visuals

Americans don't want to work past the traditional retirement age of 65. Increasingly we don't even intend to work past 62.

Why it matters: The COVID-19 pandemic was a salutary reminder that we only live once. Millions of workers seem to have taken that lesson to heart.

The big picture: The U.S. population is getting older, the Social Security trust fund is running out of money, and improvements in technology mean that many jobs are much less physically taxing than they used to be.

  • All of those developments militate in favor of working longer — and yet when asked, only 46% of workers under the age of 62 now expect to continue working past that age.

State of play: That percentage has been declining for a decade, but especially since the pandemic.

  • New York Fed researchers found that since March 2020, the number of years Americans expect to continue working has plunged by 9.5%.
  • "The decline is broad-based across age, education, and income groups," they write.

Where it stands: The data on when we have actually been retiring is less easy to find than the data on when we intend to retire, but broadly we do seem to be following through on our intentions.

  • The Employee Benefit Research Institute's latest retirement confidence survey, for instance, finds the median age at which retirees retire is 62, and that less than a third of today's retirees worked until 65 or later.

Follow the money: The long bull market in stocks and in housing has made sexagenarians richer than ever and able to afford to retire earlier.

  • The other side: Less happily, millions found themselves forced into retirement after 2020 by ill health — a phenomenon that contributed to the subsequent labor shortage.

Between the lines: The New York Fed researchers hypothesize that "a cultural shift characterized by a rethinking of the value of work" might be part of the reason for the decline in the age at which folks intend to retire.

The bottom line: Working longer simply isn't practical for many Americans. Early retirement, on the other hand, is something that can happen to anyone, out of choice or necessity.

  • Increasingly, we're choosing it rather than having it forced upon us.

Bonus: The retirement boom

A line chart that displays the share of U.S. adults who are retired from January 2000 to March 2024. The chart includes both actual and predicted data. The actual retirement rate started at 15.76% in January 2000 and increased to 19.60% in March 2024. The predicted retirement rate started at 15.61% in January 2000 and increased to 18.83% in March 2024.
Data: St. Louis Fed; Chart: Axios Visuals

Researchers from the St. Louis Fed noted last year that since the pandemic, Americans have retired "at greater numbers than what would have been expected under normal conditions."

  • Here's an updated version of their chart, showing that the number of retirees remains highly elevated.

2. Why second mortgages could make a comeback

Illustration: Natalie Peeples/Axios

Freddie Mac has a new revenue stream in its sights, thanks to the record $17 trillion of home equity sitting untapped in U.S. houses.

The big picture: An estimated $850 billion of that home equity is found in homes with first mortgages that were purchased by Freddie Mac — a so-called government-sponsored enterprise, or GSE. Freddie wants to start buying second mortgages written on those homes.

Why it matters: If Freddie's proposal is approved, a GSE-backed market for second mortgages could stimulate more lending and funnel more money to consumers. The catch, of course, is that any default would put those consumers' homes at risk.

Where it stands: Freddie's regulator, the Federal Housing Finance Agency, seems likely to approve the idea, noting that "second mortgages are typically offered at a lower interest rate than some financing alternatives such as consumer or personal loans."

The intrigue: Some folks in the financial services industry are worried this will be a success.

  • The fingerprints of a lowkey PR operation can be seen in this WSJ op-ed, and also a two-page document of talking points sent to Axios complaining that Freddie's plan could cause everything from high inflation to worsened wealth inequality. (The sender of the pitch, Narrative Strategies, declined to say who they're representing.)
  • The potential losers in Freddie's plan include firms currently securitizing second mortgages, as well as consumer lenders who would face new lower-priced competition.

How it works: Freddie has always bought new mortgages resulting from cash-out refinance operations. In the current high-rate environment, however, those loans are barely issued since they require swapping out a lower-rate older mortgage with a higher-rate new one.

  • A second mortgage effectively replicates the cash-out refinance while applying the new, higher rate only to the increase in principal amount.
  • It's different from home equity lines of credit, or HELOCs, in that it's fixed rather than floating rate, and feels more like a long-term commitment than a short-term source of liquidity.

What's next: The results could be big enough to stimulate the entire U.S. economy, per analyst Meredith Whitney, who writes that the "move could begin to unleash almost $1tn into consumers' wallets."

The other side: Bank analyst Chris Whalen, on the other hand, suggests that it's more likely to be a complete nothingburger.

  • For one thing, it's hard to imagine how anybody would market a product based on this, given that no one has a clue whether their mortgage is held by Freddie Mac. (The agency wants to ensure that if it faces a default on a second mortgage, it owns the first mortgage as well, to maximize its chances of being paid back on both.)
  • The product being envisaged — a 20-year second mortgage — would also not be very profitable for lenders, which ultimately make most of their money not by flipping loans to Freddie but rather from mortgage servicing rights.
  • Those rights on second mortgages "have little value because of the small note size," writes Whalen.

The bottom line: It's unlikely that allowing Fannie and Freddie to buy second mortgages would unleash trillions of dollars of new credit into the economy. But it's not impossible.

Thanks to Kate Marino for editing this newsletter, and to Mickey Meece for copy editing it.