Early Retirement Is Tempting Now. Tell Clients Not To Do It

The coronavirus is tempting those of a certain age to stop working. Some financial advisors report that they’re hearing from older clients who’ve grown accustomed to staying home and are worried about commuting and returning to crowded workspaces. If they were planning on retiring in the next couple of years, their thinking goes, why not just pull the trigger now?

For most Americans, even wealthy ones, the answer is clear: Don’t do it. The financial benefits of continuing to work, even for one more year as the pandemic crushes the economy, outweigh the health risks for most people.

A recent report from the New School's Retirement Equity Lab shows how dire the situation is for older employees. About 3 million more of them will fall into lifelong poverty than otherwise would have without a coronavirus recession. And the hit won't just be for the poorest. While only 15% of high earners are expected to lose their jobs, average retirement savings at age 65 for those with retirement assets are projected to drop by 31% post-recession.

For those who still aren't dissuaded, here are some other things to keep in mind. First, it’ll be harder than ever to change your mind. Many retired workers end up going back to work; one study showed that 40% of those working at 65 or after had been retired previously. Employers are now likely to be even more skeptical than usual about hiring older people, who expect higher earnings and are potentially the most vulnerable to the virus. That makes retiring now more of a permanent decision than it's ever been.

A better bet than quitting might be negotiating a part-time schedule, or continuing to work from home after colleagues have returned to the office. Alicia Munnell, director of the Center for Retirement Research at Boston College, said she thinks employers are likely to make accommodations for older workers who are valued.