Are you ready for the retirement tsunami of 2022? This year is when a record number of Americans will retire. Several factors are driving this retirement surge, including the ongoing coronavirus pandemic. Two million more workers retired during the pandemic than trends predicted. An estimated 50.3% of adults aged 55 and over left the workforce in the third quarter of 2021. But it's also a perfect storm, with the younger end of the massive Baby Boomer generation now nearing early retirement age and many choosing to leave the workforce entirely.
Additionally, the "Great Recession" of 2008 - and the consequent inflation - hit American workers hard, causing them to reassess their careers and saving goals and postpone significant life events like retiring until now. So much of what we're seeing is 'catch up' as the demand for retirement finally reaches its tipping point.
What does this mean for the workforce?
This surge in retirees has significant implications - both for those retiring and for the economy as a whole. First, as increasing numbers leave the workforce, there will be a smaller pool of workers to fill positions. The loss of so many workers could lead to a "brain drain" in some industries, as all that institutional knowledge and wisdom walks out the door. This could even lead to wage growth, as employers are forced to offer higher salaries and better benefits to attract and retain experienced workers.
As more and more Americans retire, there will be a shift in the workforce and how we work. The retirement boom presents an opportunity for younger workers to step into leadership roles and take on more responsibility. On the flip side, it's an opportunity for retirees to "give back" by mentoring the next generation or sharing their expertise. If you're nearing retirement, perhaps you're interested in working part-time or transitioning to a consulting or advisory role?
Many retirement-aged people are choosing a semi-retirement lifestyle, working part-time, or pursuing creative endeavors while also enjoying more leisure time. There are many reasons to take this approach, ranging from the enjoyable to the financial:
- to keep pace with inflation and the rising cost of living
- to maximize social security by waiting until full retirement age
- to maintain health insurance benefits
- to cultivate a sense of purpose and stay mentally sharp
- to keep socially connected with younger friends
Perhaps you've always dreamed of starting your own business - now might be the time!
What can you do to prepare for the retirement tsunami?
If you're nearing retirement, what does your ideal retirement look like? What are you looking forward to the most? What are your concerns? Do you have a plan in place to make your retirement dreams a reality? Maybe you're interested in continuing to work part-time, starting something new, or devoting more time to charitable work.
The sooner you start exploring your options and making a plan, the better prepared you'll be - not just financially but also emotionally and mentally.
Think about your work situation. Are you tired of your current job? Do you have the option to transition to a less demanding role or reduce your hours? If you're thinking about retiring early, does your company offer phased retirement options?
Making the transition into full retirement
Whether you're a Baby Boomer approaching retirement or a younger worker thinking about retiring early, there are some tough decisions to make before taking the leap.
- Start by doing some soul-searching and thinking about what you really want out of retirement.
- Review your Social Security benefits and ensure you understand how they work.
- If you're still working, think of ways to boost your retirement savings.
One of the most important factors is your financial standing. Do you have enough saved to cover your costs in retirement? Are you still paying off debts, such as a mortgage or student loans? Do you have long-term care insurance in place? (This is especially important for women, as they are more likely to live longer on their own).
Your current health is another key consideration. Do you have a chronic condition that will require ongoing treatment? Are you physically able to maintain your lifestyle? These are important questions to answer before deciding when and how to retire.
A fee-only financial advisor can help
If you're thinking about retiring, talking to a financial advisor is a good idea. They can assess your financial situation and make sure you have enough saved to live comfortably. They can help map out a retirement plan that includes income from Social Security, pensions, and other sources. And if you're still working, they can help you maximize your contributions, so you have more savings when you retire.
The next few years will be a major turning point for American workers, and there's no time like the present to start planning for your retirement. Whether you're looking to retire soon or in the distant future, now is the right time to start thinking about what you want your retirement to look like - and how you can make it happen.