Today, Paul and Chad Henson talk about a recent phenomenon called the Great Unretirement. The pandemic caused a large group of people to take an early retirement, whether it was due to layoffs or just taking advantage of the changing work climate. But now over 1.7 million Americans in early retirement are trying to rejoin the workforce.
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Paul Winkler: Welcome to “The Investor Coaching Show.” Paul Winkler, Mr. Chad Henson here talking world of money and investing and talking about the news of the day, what’s happening in the world of high finance.
Chad, I know that you’ve been keeping your finger on the pulse of things this week as I’ve been in different areas of finance. But I know you’ve had a couple things that you—
Chad Henson: Yeah.
PW: What’s going on?
CH:A couple interesting things that I came across this week is what they’re calling the Great Unretirement.
PW: The Great Unretirement.
CH: Yeah.
PW: We go through the two phases of life: One where we work for money. Then what we try to do is move to the other one where money works for you and you’re retiring.
But there are people that are going back to work. I’m assuming that’s what that means.
CH: That’s what they’re saying. The age group, usually around 60 to 65 … what happened was during COVID, a lot of people either retired and took on early retirement.
PW: They seemed to like it—is what the initial assessment was. “Hey, this is good. I can get used to doing nothing.”
CH: Exactly. Then, of course, some people said, “Oh, I like it. This is great and everything,” and now, we’ve hit a point of high inflation and things, and maybe things aren’t as rosy as we thought they were—
PW: Right.
CH: But the other segment of the population that took early retirement, a lot of them were forced to, because of business shutdowns.
PW: Cut backs.
CH: Layoffs, things—
PW: Oh, yeah. I’ve talked to several companies where they actually had to cut back because they weren’t getting the orders coming in, and they just slowed down simply unexpectedly.
CH: The recent figures show about 1.7 million people are going back into the workforce that were in the early retirement range. Just a lot of people going back in, many reasons for it.
Some, like I said, with inflation and then maybe money’s tight. Others, because they really didn’t want to retire. They were forced to retire, and now there are job openings and positions for them to go to.
PW: I wonder how much of it is that people like being needed, and there’s no question they are needed because they’re seeing the help wanted signs everywhere.
CH: Everywhere.
PW: I think there’s got to be some aspect of that where you go … because I’ve even looked it as, man, if I were a retired person and I’ve thought about that, I’d go to work at that company in a heartbeat just simply because it puts you back in contact with people again, and there is such a need that you may feel in a level of an appreciation that you didn’t while you were working.
CH: True.
PW: I could see where that would happen.
CH: Absolutely. People of that age group with the vaccines and everything, they feel safer to be back out in public now.
PW: Well, yeah. But I just—
CH: It’s just social, your aspect.
PW: You were saying that. The social aspect is what’s coming to me, because a lot of people are in jobs and I’m sure there are a lot of people that are probably nodding their head going, “Yep, that’s me,” where they just don’t feel like anybody really cares about what they’re doing.
They’re taken for granted.
Now they’re seeing all of this need and somebody who’s hiring would go, “Yes, please, come on. I would love to have you in here.”
It’s … “Wow, this is a big change compared to what I’m used to.”
I can see where that would be the case, sure.
CH: Definitely. And one of the other things that—and this is not a new trend since COVID because this has been going on for a while— we’ve seen a lot of clients who have transitioned from working to retirement by, “Okay, I’m going to stop my career now, but I’m not going to quit working and do something part-time and then ease kind of into retirement.”
Instead of, “Okay, I’ve been working 40 hours a week. Now I want to work 30 hours a week.”
PW: I’ve seen that too.
CH: “Then I want to work 20 hours a week, and then 10 hours a week, and then I’m eventually retired.”
PW: I know one doctor, and we talked recently and he works a few weeks. Now, he’ll work the full week, but he’ll work maybe two, three weeks and he’s done.
He’s making a salary doing that, amazingly, so a lot of people have to work year-round to get that. It’s a very enviable position.
CH: Right. I think a lot of it depends on what field you’re in, whether you are able to do that or not. Certain jobs, naturally, you can’t just dictate that, “Okay, I’m not going to work 40 anymore. I’m going to work 30.”
But if you’re in a position to do that, it kind of lessens the blow in the because I think most people’s biggest fear when they retire is going from, “Okay, I’ve had this regiment that I’ve done for 40 years. I get up, I go to work, I work five days and then I’m off on the weekend, and then I start all over and do it again.”
PW: Right. I can see where people would gravitate toward seasonal occupations as well.
CH: Sure.
PW: Maybe only work in the fall and the winter, right around Christmastime, or only work in the summer if you’re an outdoor person doing landscaping or you’re a tour guide or something.
CH: I think a lot of landscapers would argue with you that summer was a great thing, but that’s when they make their money, so sure.
PW: Well, no, but I was talking to one a couple days ago and I said, “What do you think of your work?”
“I love it. Absolutely love it getting outdoors all day long, nothing better.”
CH: It’s a job you have to love though. I love being outdoors, but I don’t think I want to be a landscaper.
PW: Well, he absolutely loves it, loves the creativity of it. Isn’t that funny about how people, it’s like go, “Man, I’m glad there are people that do what you do.” People say that to us all the time: “I’m glad there are people that do what you do.”
Because we always assume somehow everybody likes doing what we like doing.
CH: Definitely. In this, with people going back to work who are in that age range who maybe retired early, one thing you must be cautious of is if you did retire early and you turned on Social Security.
PW: Yeah.
CH: You’ve got—
PW: It’s a penalty.
CH: You’ve got to worry about the income limits if you’re not going back to work full-time.
PW: If you’re under your full retirement age, which for people born after 1960 or after it’s, say, ’67, you got the $2 that you earned over the threshold, it’s about $19,000, you get $1 of your Social Security taken away.
But don’t make that a reason not to earn more money simply because what they do is they recalculate your age at your full retirement age.
CH: Exactly, but you need to be aware that you’re not going to keep receiving your full benefit and your salary and everything like that.
PW: And that’s a really good point to be made.
If you make, let’s just use $19,000 as a nice even number. It’s not exactly that, but let’s use that, unless you’re making $29,000, you’re making $10,000 over, they’re going to take away $5,000 of your Social Security.
Let’s say that that happens to be, oh, just for the fun of it, let’s say that happens to be three months’ worth of benefits. You do that for four years before you hit your full retirement age, you lose a full quarter’s worth of benefits, let’s say.
Then what’s going to happen is they take away a full quarter for four years, they will deem you to be one year older than you are when you hit your full retirement age, and they’ll recalculate your Social Security as if you were one year older. It’s not the end of the world.
CH: You’re not losing it forever; you’re just temporarily writing it off. You brought up an excellent point in the fact that, don’t let that discourage you from going back to work because there’s other long-term benefits that go along with it.
For instance, let’s say your Social Security wasn’t enough to cover all of your expenses, which in most people’s case, it’s not. You’re going to be withdrawing from your portfolio.
Well, by going back to work while you can or you want to and everything like that, you put off having to draw on that portfolio, which increases the longevity and the likelihood of it lasting throughout your lifetime.
PW: The big issue with investment portfolios is the sequence of returns risk if you have negative returns or bad returns early on. Because markets are going to go down. News flash: It’s going to happen.
When you recognize that the market is down more, the investments are down more than you like and you’re early on in retirement, that can actually have an effect, a negative effect. The only times that you really look at it are when you’re doing probability analysis, where things get difficult as if early on in retirement, the markets are down.
Now when we look back at history, you hear us talk about the various rules of investing and how much income you can take from a portfolio. You often hear us refer to the 4% rule. Much, much, much more severe market conditions than what we’re seeing now would have caused problems, but that’s something to consider.
CH: Absolutely.
PW: You may be in a portfolio that wasn’t as well diversified and you’re down more than you should be right now.
CH: Sure. You saw that a lot in 2008.
PW: Oh, yeah.
CH: The variability of people’s portfolios.
PW: Oh, my goodness.
CH: People who were well diversified and spread out, I mean, there was no place to hide naturally, but—
PW: But your bonds actually held up. But a lot of people didn’t own the right types of bonds.
CH: Exactly. If you had the wrong types of bonds in there, but if everything was properly diversified, you’re looking somewhere between 30% and 40% decline, depending on what the bonds were.
PW: Even if you did it right. Depending on how … if you had more bonds, it wasn’t quite that bad.
CH: But tots of people lost 70%, 80% of their portfolio. I can’t imagine what that was like.
PW: Oh, I had people listening to the radio show and they would go, “I heard you talking.” They would come in and I would go, “Oh, yeah. You went down more—”
CH: Than you should have.
PW: And they had to go back to work. I mean, there was just no way around. Some of these people are going back to work for those reasons as well, because maybe they weren’t as well mixed.
But are they doing the same jobs that they were doing? Does it talk about that?
CH: It really depends. They didn’t talk a great deal about it, but from my opinion, if you were in a field that you liked and you enjoyed and you want to go back to that field, there are probably opportunities to get back into that field.
PW: You got specialized now.
CH: Maybe even with the same company, the same job you had potentially.
PW: Right.
CH: But for people who were like, “I’m glad that’s over with. I want to move on to the next chapter,” there are lots of opportunities and openings out there.
What a lot of people did during this—and I saw a lot of this in different articles—and this is not the retirees but younger people who were working in restaurants and retail as servers and clerks and things of that nature, when their hours were cut back or they were shut down, they took a lot of online courses.
PW: I was going to say, they went back to school.
CH: It’s not like you went and spent four years at college getting a bachelor’s degree, you just got a certification in something.
When things opened back up, there were lots of opportunities and that’s why you see so many openings in retail and restaurants and things now—
PW: Restaurants, especially.
CH: Because those people who were working those jobs got an education or a certificate or something that allowed them to actually move up in the workplace to different positions. And so, even retirees can take advantage of that.
PW: That’s a really good point because online education took a big leap forward—
CH: Absolutely.
PW: Now people can actually look at a lot of the universities locally. They’ve been seeing the writing on the wall that people don’t come in person necessarily.
CH: Right.
PW: I know Trevecca … I talk about those guys a lot, because that’s where I’ve been going and getting my master’s. They actually have a lot of online courses.
Now my particular area isn’t online, but there are a lot of them that would be jobs that a lot of people would look at and go, “Hey, that would be fun to learn about that.” It’s good.
CH: We’ve all seen those commercials on TV.
PW: Oh, is that what they say in the commercials?
CH: Well, no, they don’t say that in the commercial, but a lot of times you’ll see people in sweatshirts—
PW: In their pajamas?
CH: Sweat pants, pajamas.
PW: You know me and TV, Chad. Come on.
CH: I know you and TV. You don’t—
PW: Don’t bring that up.
CH: What’s a TV?
PW: Exactly. Who has time for it? Anything else that you found when you were doing that research on people going back that’s interesting?
CH: Didn’t really find anything else in that article. It’s just things that I think, and you mentioned some of them, the social aspect of it.
I think a lot of people were kind of forced into this early retirement. I think that’s what a big portion of it is.
If you were 60 years old and your business laid you off or your business shut down and you really didn’t have any options, because I mean, quite frankly, with everything shutting down, it wasn’t like you could just go and find another job anywhere.
But maybe you hadn’t planned on retiring until 65 or 67 or whatever the age may be.
But now that things have kind of turned the corner, businesses are operating at normal and everything now, I think a lot of these people who weren’t ready to retire are jumping back into the workforce.
Then I think some of the people who thought they might be ready to retire, whether it’s the social aspect or monetary, have decided, “Hey, maybe working a few more years is in my best interest.”
PW: Or sheer boredom.
CH: Absolutely.
PW: I’m playing golf all day long and going, “Okay, I really love this sport a lot when I played twice a week, but seven days a week isn’t my thing.”
CH: There’s the old saying, “If you do what you love, you’ll never work a day in your life.” There’s also the flip side of it. Because people like to fish or something. “Man, if I could make a living in fishing, it would be great,” but when you start making a living in fishing, it’s no longer a hobby, it’s a job.
PW: Oh, yeah. I find that with music. People who are musicians go, “Oh man, another day in the studio. I used to love this, and now …”
CH: Right. So sometimes it’s best to keep a hobby a hobby.
PW: Yeah. Serving humanity doesn’t … My wife sent something, a meme, and it was something like being a decent, nice human being doesn’t cost anything.
There’s another side of that.
CH: Very true. Very true.
PW: Which speaks to the whole idea that so often we spend money because we think that it will get us what we want, which is better connection with humans.
The reality of it is you can get better connections with humans without it costing anything and maybe actually make money doing it.
CH: Right.
PW: That’s definitely a good point. All right. You are listening to “The Investor Coaching Show.”
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