Are the Retirement Police hot on the “Excessive” Retirement Trend Trail?
Retirement Police All Points Bulletin (APB) for “Excessive” increase in Retirees
Another reason to justify expanding the Retirement Police Force. In October 2022, the Federal Reserve of New York reported that the pandemic created an “excessive” retirement trend. Lest, retirements rose “almost 1½ percentage points above its pre-pandemic level.” The Retirement Police are hot on the trail of this audacious group. Correspondingly, this increase of 3.5+ million retirees accounted for all of the total shortfall in the Labor Force Participation Rate. The United States does need a workforce after all. Everyone cannot be retired, right?
However, the report acknowledges an aging Baby Boomer population would have raised retirement levels gradually without the pandemic. Further, about two-thirds of the total increase in the excess pandemic retirements were age 65 and up. Additionally, unsurprisingly, there was a particularly sharp increase in retirement for those age 70 and older. I’m no genius but additional retirements in this age range seems reasonable to me.
Emphatically, the “excessive retirements” at age 65+ increased more than expected for Whites relative to Blacks and Hispanics. Additionally, pandemic retirements impacted those with a college education relative to those without. I could provide multiple reasonable explanations for these unexpected retirements.
Audacity of Age 55 to 64 “Excessive” Retirements
However, the Fed notes “excessive” retirement increase includes another one-third individuals aged 55 to 64 when the pandemic began.
Forcing individuals into retirement during the pandemic has been a common theme. Downsizing and layoffs are a real risk for individuals as they age regardless of performance and even outside of a pandemic. Anecdotally, several people we know who who received a severance during the pandemic decided that their unplanned “retirement” was permanent. Most of these individuals acknowledge their “premature” retirement is much leaner than planned but that they enjoy the freedom. A few of these individuals work part-time, occasional jobs, some just outright volunteer for jobs that would otherwise involvement payment. Cue the retirement police sirens.
Typical Retirement Patterns in the United States Reveals Early Retirement is Rare
According to the Federal Reserve Report noted above, in pre-pandemic levels, the retirement trends typically followed this pattern:
Anyone retiring at age 50 is a unicorn. Retiring at age 50 is essentially non-existent. Age 50 equals nearly zero-percent chance of retirement. Retirement at age 60 increases to about 20-percent of the population. Normally, retirement increases by another 20 percentage points between the ages 60 and 65- which the Federal Reserve categorizes as “early retirement.” Traditionally, retirement increases by another 20 percentage points between age 65 and 70- ages classified as normal retirement. Further, between ages 70 and 75, retirement increases another 10 to 15 percentage points. Finally, retirement levels off beyond age 75 are around 80 percent.
My Father followed a typical retirement pattern. As I have discussed before my father was financially clueless but taught me some of the most important psychology of money lessons.
Financial Independence Retire Early (FIRE) Unicorns
For those in the FIRE community, particularly those retirees pre-age 50, you are rare unicorns. The government classifies you age 50 and under retirees as essentially statistical anomalies. Of course, many of you unicorns are not retired but are still working at non-W-2 jobs. The Retirement Police will charge you for “falsely impersonating a retiree.”
Logically, the difficulty of accessing retirement accounts without penalty prior to age 59 and a half contributes to this pre-age 50 unicorn factor. Arguably the government would have difficulty in determining a “pre-age 50 FIRE unicorn” as truly being “retired” in the traditional sense. Further, if the “pre-age 50 FIRE unicorn” has some smaller source of untraditional income, such as a small business or consulting job, you would not be on the government’s radar. In fact, it is probably more likely you would be considered “under-employed” if you work less than full-time and are living of a relatively small income by U.S. standards.
Sounds like we really need government “retirement police” instead of the “internet retirement police” Mr. Money Mustache has described. Surely you know I’m joking, but this could be a real job creator. However, if you are away traveling or out of the country all together, it will be much hard for the “retirement police” to catch you.
Waking Up to Excessive Retirement May be Right For Us
Recently, in examining our own finances, we determined at that we Coast FI. It should have been obvious to us that we were Coast FI but even we needed the wake up call. We will not be a pre-age 50 FIRE unicorn. However, understanding that we have achieved Coast FI status, is motivating us that our 94 months left to achieve FI may be possible even sooner. Why wait until age 59 and a half to retire if we do not have to do so?
Please share with us your story on the pathway to FI.
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