The pandemic forced more older workers to retire — often before they were ready financially — a new study found, widening the country’s growing retirement inequality gap and leaving certain baby boomers vulnerable to poverty in their golden years.
During the pandemic, an additional 1.7 million Americans retired earlier than what would have been expected during the normal times, according to a recent report from The New School’s Retirement Equity Lab. While the bulk of these retirees were 65 and older, a significant amount were younger, without a college degree, and less financially prepared for the sudden change.
Involuntary retirement among older adults without college degrees isn’t endemic to COVID-19. Between 2019 and 2021, the retirement rate increased 5% among non-college-educated adults ages 55 to 64, while the retirement probability rate decreased by 4% for their college-educated peers.
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“The system works much better for people who have a high marginal tax rate and who have steady employment,” Teresa Ghilarducci, a labor economist at The New School and director of its Schwartz Center for Economic Policy Analysis and study co-author, explained to Yahoo Money. “People with stable careers and stable lives, and earn a high income, usually people with college degrees, are much better served by the system compared to everybody else.”
A college degree can be a distinguishing factor when it comes to not only prospects but safeguarding from job market downturns. When unemployment reached its pandemic-era peak in April 2020, workers aged 55 to 64 without a college degree were 67% more likely to experience unemployment than college-educated older workers, the study found.
Job insecurity, and fewer and lower-paying prospects that often pay below what the college-educated earn, when stretched over the course of a career, amount to lower savings rates than college-educated counterparts leaving many vulnerable to the risk of poverty in retirement, especially if it’s unplanned, Ghilarducci said.
Older workers without a college degree had median household retirement savings of $9,000 in 2019, compared with $167,000 for the same age group with a college degree, the study found.
Ghilarducci forecasted a “massive downward mobility” for Baby Boomers approaching retirement who will be required to downgrade their lifestyles and living standards in their golden years that will likely contribute to an “increase in the poverty rate” and “many more poor elders.”
“COVID has made those structures of inequality much worse because it forced people out without college degrees, who have lower incomes, who might have likely had more unstable work lives out of the labor market,” she said. “Work was their only source of income and their biggest hope to stay out of poverty in old age.”