Inflation has risen yet again at a rate not seen in four decades, and as costs continue to climb on basic living essentials such as food, many who are close to retirement are delaying it, and those in retirement are being forced back to the workplace, reports the Wall Street Journal.
Economists believe that it could be a positive for the overall economy as more workers help to potentially promote growth, but for those impacted, it’s been a hard wakeup call for their retirement plans being misaligned for a rising rate environment.
“We’re beginning to see the migration of the older cohort who expected to live on fixed income in a low interest-rate and low inflation environment,” explained Joseph Brusuelas, chief economist at RSM US LLP. “That has not materialized; therefore they have to come back to the labor force to create the conditions so they can retire.”
The onset of the pandemic in 2020 saw a growing number of people retiring earlier than they had expected, around 2.6 million, as estimated by Miguel Faria-e-Castro, Federal Reserve Bank of St. Louis senior economist. With vaccines, reopening, the potential for remote work for many white-collar positions, and the pressures from inflation, workers and retirees are returning to jobs at increasingly high levels. The national participation rate for jobs was 62.4% in March, a gain over the 61.7% in October 2021.
“Really what you’re dealing with is an inflationary shock that has elicited a change in behavior,” Faria-e-Castro said, discussing the unprecedented numbers of retirees re-entering the workforce.
Pressures from rising rates and the impacts they are having to fixed income are very looming concerns for those looking to retire soon, causing many to delay that decision as they work to build their savings more. That uncertainty is doubly hard for those already retired and living on a shrinking amount of fixed income as interest rates climb.
“For retirees, it’s very hard to know if they’ve saved enough,” said Kathryn Edwards, an economist at Rand Corp., going on to explain that rising rates are now the “big X-Factor that’s becoming more unpredictable.”
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