Some of the elderly who work do so because they want to, some because they have to, and some for a blend of those reasons.
People well over 65 are remaining in, or returning to, the U.S. workforce in impressive numbers. According to Indeed, as of April 2022, 1.7 million people had unretired over the preceding 12 months. Indeed’s economist, Nick Bunker, analyzed data from the federal government’s Current Population Survey.
Why is this a trend in 2022? One background consideration: many older workers were pushed out of work during pandemic-related closures. Or maybe they retired as part of a broader desire to isolate themselves. Either way, as the pandemic has receded, they have returned to the picture.
If we take the pandemic as having begun in February 2020, the number of people who retired in the following year and a half who were under 60 is greater than the number who did so in the age bracket 60-67 (700,000 and 500,000 respectively).
More poignantly, though, the unretirement trend of 2022 is a consequence of inflation as it impacts a fixed income. Inflation hit an annual rate of 8.6% in May. It hasn’t been in that neighborhood for 40 years, since the time when the people now retiring were still new to the workforce.
Glass Half Empty or Half Full?
“There is no more retirement,” John Tarnoff, a career counselor, bluntly told Yahoo Finance. “The costs of living were going up even before the current inflationary cycle that we’re in now—costs were rising, fixed incomes were no longer good for people, Social Security as an institution is under threat.”
Bunker has a more optimistic view of the reasons for the return than Tarnoff.
“As COVID seems to be waning, the labor market continues to be strong, and nominal wage growth is still fairly high; that’s enticing people to take jobs,” he said.
Jun Nie and Shu-Kuel X. Yang, the co-authors of an analysis for the Federal Reserve Bank of Kansas City, speak of unretirement as a “postponement” of plans. Perhaps a couple still plans to travel, or move to a condo near a Tampa beach. “Many of those who postponed their plans [in order] to rejoin the labor force still have time to do so when the pandemic ends,” said the analysts.
As these different analyses suggest, Tarnoff may have overstated matters with the blanket assertion that “there is no more retirement.” There are other ways of looking at this “glass.”
Still, if there are people in the workforce who still have the idea, even if only in the back of their heads, that there exists a secure safety net that comes into position for them at some point between the ages of 60 and 70 and that rescues them from the need to keep working, it would be wise for them to abandon that premise.
Tax Considerations
As this idea is abandoned, tax considerations come into play. Retirees on social security who are returning to the workforce may have to re-acquire the abandoned habit of filing tax returns.
They may then encounter some unpleasant surprises. For example, consider a retiree (John Smith) who had a long career in footwear marketing. Smith comes out of retirement because the world traveling that he had hoped to do is more expensive than he had thought it would be.
It may prove that the most convenient way for Smith to get back into the workforce is for him to become a contract consultant. Nike may be reluctant to expand its payroll to take him on.
In that case, as a 1099 consultant rather than a retiree, Smith will have to pay both the employers’ and the employees’ side of the retirement tax. This may mean that his real pay is a good deal less than he had expected.
Spencer Betts, a certified financial planner in Massachusetts, told Yahoo that workers should be mindful of what stage of retirement they are in before they unretire. Retiring before full retirement age and then unretiring has consequences.
“If you’re below full retirement age, you can make up to $19,560 and receive all your benefits.” But above that threshold, you give $1 of your social security back for every $2 you earn.
The Future of Unretirement
Of course, one can at best make guesses about the future of unretirement as a trend. A rosy scenario is that the inflation beast is quickly tamed. Morningstar suggests that consumer prices could fall precipitously in 2023. That would presumably reduce the rate of unretirement and allow us to say to people who have delayed their travel plans, “bon voyage at last!”
One can’t count on “rosy,” though. In some areas (such as the market for rental housing), the inflation dangers are more ahead of us than behind. Furthermore, more-or-less explicitly pro-inflation ideas, such as “modern monetary theory,” are getting a foothold in the academic and think-tankers’ mainstream, and that foretells trouble.
The future of unretirement also depends on epidemiology. The pandemic seems to have faded, much of the populace is vaccinated, and there are treatments available that were undreamt of two years ago. All that said, though, it is still possible that COVID has tricky new variants up its sleeves that will persuade some of the retired, those on the margins of a back-to-work decision, that they are better off staying retired.
Another epidemic entirely, the monkeypox or something now unforeseen, could further complicate the lives and decisions of people on that margin.
Epidemiology cuts in at least two ways. On the one hand, as noted, retired people may well decide that it is easier to isolate themselves and avoid contagion if they remain in retirement. But on the other hand, a viral outbreak may also exacerbate labor shortages or create new ones in industries where they don’t already exist. This could push wages up, luring people out of retirement.
The Bottom Line
The bottom line, though, is that there is no guarantee of tranquil, trouble-free golden years outside of the portfolio you have built for yourself.
A sound portfolio will be a diversified one, and precious metals will be part of that diversification.
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The opinions, beliefs, and viewpoints expressed in this article do not necessarily reflect the opinions, beliefs, and viewpoints of Red Rock Secured LLC or the official policies of Red Rock Secured LLC. Red Rock Secured LLC is not a financial advisor, is not licensed to provide investment advice and neither provides investment nor financial advice. Red Rock is a product specialist that can help evaluate your precious metals purchase options.
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