Retirement: Workers Don’t Expect to Work Full-Time Past 62
Posted By RichC on May 19, 2024
It is time to face the inevitable that working later in life is not a reality for most people. As I commented on a Barron’s article last week, you “better have a Plan B or 
even a Plan C” in case there is a health concern that prevent working later in life. From personal experience, a lot of things can happen around that 60 year old mark.
A recent Liberty Street Economics blog post shared a couple interesting graphs that could get you thinking a little differently.
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One of the most striking features of the labor market recovery following the pandemic recession has been the surge in quits from 2021 to mid-2023. This surge, often referred to as the Great Resignation, or the Great Reshuffle, was uncommonly large for an economic expansion. In this post, we call attention to a related labor market change that has not been previously highlighted—a persistent change in retirement expectations, with workers reporting much lower expectations of working full-time beyond ages 62 and 67. This decline is particularly notable for female workers and lower-income workers.
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Average Likelihood of Working Full-Time Past 62
Source: SCE Labor Market Survey.
Notes: The vertical dashed lines indicate the start of the pandemic. Horizontal lines indicate pre- and post-pandemic means.
Source: SCE Labor Market Survey.
Notes: The right panel shows the likelihood of working full-time past age 67 for those with annual household incomes above (dark blue line) and equal to or below (gray line) $60,000. The vertical dashed lines indicate the start of the pandemic. Horizontal lines indicate pre- and post-pandemic means.
The Post-Pandemic Change in Retirement Expectations
In this post, we document an important related development not previously highlighted—a post-pandemic change in retirement expectations. Our analysis is based on data from the Survey of Consumer Expectations’ (SCE) triannual Labor Market Survey. Over its decade-long life the SCE, a foundational dataset of the Center for Microeconomic Data, has produced many valuable insights into consumer expectations about a wide range of economic behaviors and outcomes. The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads. Respondents participate in the panel for up to twelve months, with a roughly equal number rotating in and out of the panel each month. The SCE Labor Market Survey module, fielded triannually since March 2014, provides information on consumers’ experiences and expectations regarding the labor market. Our analysis in this post is based on two specific questions in the survey. The first asks respondents below age 62 “Thinking about work in general and not just your present job (if you currently work), what do you think is the percent chance that you will be working full-time after you reach age 62?”. A similar second question is then asked about working full-time beyond age 67, to those younger than age 67. The questions are similar to those asked in the University of Michigan’s Health and Retirement Study.
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Drivers and Implications
The pandemic and the pandemic-induced recession are behind us and the recovery of the U.S. economy is continuing, but longer-term effects of this experience linger. Although wage growth has begun to moderate, vacancies are down, and layoff and quit rates are back to pre-pandemic levels, our survey responses reveal a persistent decline in expectations of working full-time beyond ages 62 and 67. Given improvements in health and increases in life expectancy, this may be somewhat surprising. It is unclear what factors or combination of factors are driving this persistent decline: an increased preference of part-time over full-time employment; a cultural shift characterized by a rethinking of the value of work; a reflection of increased household net wealth; increased confidence about future growth in earnings and income and future financial health; a greater optimism about reaching retirement saving goals; or increased uncertainty about life expectancy post-pandemic. This represents an important topic of future research.
The pandemic-induced change in retirement expectations may continue to affect the labor market in years to come. It also can have important macroeconomic implications when consumers act on their expectations in making consumption and saving decisions. To the extent that these expectations signal actual future retirement behavior, they also have implications for future decisions by consumers about the timing of claims for social security benefits and the receipt of those benefits.
Our finding of a post-pandemic shift in retirement expectations is a prime example of the type of new consumer insights the SCE has been providing over the last decade.
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