Researching COVID-19’s Impact on the “Great Retirement”

From left: Lowell Ricketts, a data scientist at the Institute for Economic Equity, and Miguel Faria e Castro, a St. Louis Fed research economist

The onset of the COVID-19 pandemic in March 2020 led to major disruptions in the U.S. labor market as social distancing and other public health measures triggered business closures and layoffs. But what was the pandemic’s impact on the decision to retire?

In a 2022 Timely Topics Podcast episode, Miguel Faria e Castro, a senior economist with the research department at the Federal Reserve Bank of St. Louis, and Lowell Ricketts, data scientist with the St. Louis Fed’s Institute for Economic Equity (IEE), discussed their research on what has been called the “Great Retirement,” the surge in retirements that began with the start of the pandemic.

How Many Additional People May Have Retired?

Faria e Castro began looking at this issue when he was investigating why the country’s labor force participation rate remained below pre-pandemic levels despite the quick and strong recovery following the COVID-19 recession.

“This led me to dig a little bit deeper into the data, and what I found is that the number of retirees in the United States increased way beyond what normal demographic trends would predict,” he said.

He noted that the U.S. is already experiencing growing retirements as the baby boom generation (typically defined as those born in 1946 through 1964) leave the workforce. However, he found that once those effects are taken into account, the actual increase is much higher than the predicted trend.

In the podcast interview, Faria e Castro said he estimated that there were about 2.6 million “excess” retirees above the predicted trend. He added that older workers wanting to avoid the virus and financial gains made in retirement savings during the COVID-19 recovery were among the reasons why more people retired.

(For an updated analysis of the retirement impact, see his work with Research Associate Samuel Jordan-Wood in their On the Economy blog post in January 2023.)

Who Are the Retirees?

In the podcast, Ricketts discussed a different aspect of this “Great Retirement.” Working with William Rodgers III, vice president and director of the IEE, Ricketts examined monthly labor data to determine the characteristics of those more likely to retire.

“We conducted a statistical analysis looking at groups over the age of 65, over the age of 75, and we tried to understand what were the factors, demographically speaking, that were predictive of retirement,” he said.

Based on their research, they found that the following characteristics were predictive of retirement: over the age of 65, a white female, a veteran, not having a college degree and being married.

Ricketts and Rodgers also found that Black and Hispanic workers were more likely to still be working at these older ages.

Ricketts explained that the ability to retire is based on the level of savings people can fall back on, which can differ by race and ethnicity.

“The racial wealth gap is suggestive that some of these workers just don’t have the retirement savings to exit the labor force and are still working, and in this case during the pandemic, in a labor market that exposes them to increased risk,” he said.

In this podcast, Faria e Castro and Ricketts also discussed the financial market conditions that help spur retirements and whether some of these retirees may eventually reenter the workforce. (Transcript available here.)