Retirement & Financial Planning Report

Image: G.Tbov/Shutterstock.com

The most recent two economic recessions had differing impacts on rates of retirement, with little change seen from the 2020 “Covid Recession” as compared with the late 2007-mid 2009 “Great Recession,” a study has found.

The Center for Retirement Research said that while rates of earlier retirement, as measured by filing for Social Security benefits before reaching the age where benefits are not reduced, “rose notably” due to high unemployment rates during the Great Recession, there actually was a “slight decline” from the Covid Recession even though unemployment also spiked then.

Initially, it said, “the Covid Recession seemed like it would result in an increase in early claiming, similar to the Great Recession. However, pretty quickly, the Covid Recession turned out to be very different.”

Reasons for the difference, it said, included that the Great Recession lasted 18 months and was marked by a sharp decline in stock market values that took just as long to recover, where the Covid Recession lasted only three months and after an initial drop in markets, stock values surged, quickly more than erasing those losses. That quick recovery “increased the relative likelihood of early claiming among those with retirement assets, whereas during the Great Recession workers remained in the labor market to replenish depleted balances.”

Also, during the Covid Recession, increased unemployment benefits were quickly enacted, reducing early claiming rates by those at lower income levels, it said.

It added that while those in relatively poorer health might have been expected to retire early due to a pandemic-related recession, that did not turn out to be the case. “Two explanations for the surprising results are possible. First, reporting poor health is likely correlated with other variables in the equation such as education, wealth, and income, and therefore has no independent effect. Alternatively, because Covid allowed people to work from home, those in poor health may not have needed to exit the labor force,” it said.

Retiring from a Federal Career: Prepare to Wait

The Process of Retiring: Last-Minute Changes

The Process of Retiring: Check Your Agency’s Work

TSP: Don’t Spend it All in Once Place

Pay Gap Increases; New, Expanded Localities Again Recommended

Looking Forward to a Lump-sum Payment for Unused Annual Leave

The Government Pension Offset and Social Security

askFW: Calculating a Federal Annuity – FERS and CSRS

askFW: Federal Annuity Calculation for LEOs and Firefighters

FERS Retirement Planning Bundle: 2022 FERS Guide & TSP Handbook