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An Unanticipated Retirement Wave Is Happening Right Now in the U.S.

Man on dock overlooking lake at sunrise

Millions more employees than expected are leaving the workplace in favor of retirement—a phenomenon that stands to have an outsized impact on employers.

The U.S. currently has roughly 2.7 million more retirees than predicted, Bloomberg reportsaccording to a model designed by an economist at the Federal Reserve Bank of St. Louis. That’s up 80 percent from six months ago, when there were roughly 1.5 million more retirees than anticipated. By contrast, prior to the pandemic, there often were fewer retirees than expected.

Although positive factors like an improved stock market and cooling inflation are likely contributors to the retirement wave, there may be some more negative workplace factors at play, including return-to-office mandates and rising rates of burnout, said John Lowell, a partner with consulting firm October Three in Woodstock, Ga.

“Retirements among older workers in 2023 and 2024 are at least as much psychological retirements as they are financial,” he said. “In fact, in many cases, I think those people are retiring despite knowing that they really can’t afford to. They are, in many of those cases, burnt out. I suspect that having to return to an office was a tipping point for many.”

Indeed, return-to-office mandates have been on the rise in the past year, after remote work was largely normalized as a result of the COVID-19 pandemic. While some studies find that offices promote better collaboration and higher levels of employee productivity, other studies imply that return-to-office mandates can backfire by causing many employees, including high-performing workers, to walk out the door. Meanwhile, burnout rates have also risen in recent years, with Aflac finding that 57 percent of workers are experiencing at least moderate levels of burnout.

Also surprising is that the retirement wave comes amid a host of dire retirement stats indicating that employees are worried about their post-work savings and do not feel ready to retire: In 2023, both workers’ and retirees’ confidence in having enough money to live comfortably throughout retirement fell to the lowest rate since the Great Recession, dropping to 64 percent from 73 percent in 2022 among workers and to 73 percent from 77 percent in 2022 among retirees, according to data from the Employee Benefit Research Institute (EBRI) and Greenwald Research.

Meanwhile, sky-high inflation, the pandemic and other woes have caused a significant number of employees to turn to their 401(k)s for funds, with nearly a third (30 percent) of workers tapping into their retirement savings over the past 12 months to pay for short-term expenses, according to a December Betterment at Work survey.

And another EBRI report indicated that health care in retirement is a growing issue, as just 3 percent of private-sector companies were still offering health care plans that supplement Medicare for eligible retirees in 2022.

However, a recent Bank of America report found some positive news in regard to retirement—perhaps an early sign that employees are beginning to feel more confident about their retirement savings. Bank of America found that 401(k) account balances rose 15 percent year-over-year to an average of $86,280 in 2023 (up from $75,045 at the end of 2022), while HSA balances rose 11 percent in 2023 to an average of $4,380 (up from $3,930 in 2022).

What It Means for Employers

One thing is certain: Millions of unexpected retirements will have repercussions for employers. Not only will organizations likely have fewer employees due to higher numbers of retirees, but also they might not be able to plan for employees’ retirement.

“Patterns of retirement have gone out the window,” Lowell said. “Back in the days when pensions were prevalent, we could fairly accurately predict rates of retirement among a population. Today, the patterns are far more around a mindset. People simply decide they have had enough.”

For companies where institutional knowledge or very specific job knowledge matters, not being able to plan appropriately for the retirement of one of those knowledgeable people “can be very damaging,” he said. “What happens when they and you don’t have enough time to develop their replacement?”

Higher-than-expected retirement also will impact retention and attraction hurdles, notably in a hot job market that is already causing employers to struggle when it comes to retaining talent.

“If a company suddenly has twice the number of retirements as expected, they have twice the number of often key roles that they need to fill,” Lowell said. “That creates a situation where supply trails demand and the cost of finding replacements becomes much more expensive.”


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