Some of those who left the workforce was forced into retirement and we are retiring earlier than ever, but many of those who left the workforce are not financially prepared.
There are a few lucky ones who left the workforce during
the pandemic because soaring stocks boosted their retirement savings. However,
this is a small group, many retired early because they lost their jobs and
struggled to find new work. And as virus cases remain at elevated levels, some
are just too worried about the pandemic to keep working.
Yet a recent study from Boston College suggests a large
share of retirees can't really afford to retire. Thirty-six percent of
Americans aged 65 to 69 aren't able to cover just one year of minimal care,
according to the study from Boston College's Center for Retirement Research.
Only 21% of Americans can cover a year of severe needs, such as dementia or
physically debilitating health issues.
The team's calculations include the need for paid and unpaid
care. It also uses the median hourly rate for a home health aide for paid-care
calculations, which totalled $22 per hour in 2018.
College graduates are also much more prepared to cover care
costs than less-educated Americans. Just 14% of people with college degrees
can't afford a year of minimal care, according to the study. Conversely, 65% of
those who never graduated high school don't have the means to pay for care.
And white Americans are generally much better equipped for
retirement than racial minorities. Just 32% of white Americans can't cover
minimal elderly care, according to the study. That jumps to 49% for Black
Americans and doubles to 64% for Hispanic Americans.
The findings paint a bleaker picture of retirement at a time
when millions of Americans - many unwillingly - have yet to return to the
workforce. The labour force participation rate for Americans aged at least 55
years sits near 15-year lows after tumbling at the start of the pandemic, while
the broader rate has staged a much more significant recovery. The data, along
with booming retirement accounts, suggest many Americans were forced into early
retirement due to the pandemic.
Many of those who haven't retired yet have done little to
prepare. Twenty-six percent of non-retired Americans haven't saved a penny for
their eventual exits from the workforce, according to a 2019 Fed study. That
means a significant number of Americans didn't benefit from the stock market's
boom through the pandemic recovery and are likely to have a little financial
cushion if any by the time they retire.
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