Early retirement was a symptom of the pandemic. Why many aren't going back to work

Last year, many Americans who retired early during the pandemic were mulling a return to the workforce, casting themselves as potential saviors of a labor market beset by severe worker shortages.

No longer.

Just 14.2% of retirees say they plan to go back to work, down from 18.2% in February 2022, according to a survey last month by Morning Consult, a decision intelligence and research company. Among those who quit working in the most recent two-year period, 29.1% say they’ll come back, down from 34.4%.

Perhaps more tellingly, 60.5% of retirees say they wouldn’t return to work under any circumstances, up from a low of 48.1% in May 2022, the Morning Consult survey shows.

Many have settled into post-career routines, and the forces that were luring them back to the grind, such as high inflation, a hot job market and tumbling 401(k) balances, have abated, at least to some extent, says Jesse Wheeler, senior economist of Morning Consult.  

The upshot: Don’t count on retirees to solve COVID-related labor shortages that have eased substantially across the nation but persist in industries such as health care and education.

“I wouldn’t put (that group) anywhere near the top of the list” of demographic factions likely to return to the workforce, says economist Dante DeAntonio of Moody’s Analytics.

Instead, it’s the return to the labor force of workers in their prime working years – 25-54 – that has boosted the share of Americans working or looking for jobs and helped alleviate labor shortages, DeAntonio says. Many stay-at-home mothers are taking advantage of remote work options or some increased availability of child care services.

That, in turn, has moderated wage growth and inflation, helping convince the Federal Reserve to pause its aggressive interest rate hikes.

Why did so many people retire during the pandemic?

In 2020, with COVID raging, many people in their 50s and 60s moved up their retirement timetables and bolted because of increased health risks, burnout and 401(k) plans that were swollen by a booming stock market.

By 2022, the pandemic was easing, the labor market was sizzling and inflation was gathering force, prompting many of the early retirees to say they were plotting a comeback. At least some followed through.

What percentage of retirees go back to work?

Through much of last year, 3.2% of workers who were retired a year earlier said they were now working, a figure that topped the pre-COVID level after falling as low as 2.1% during the health crisis, according to an analysis of Census Bureau figures by Nick Bunker, economic research director for Indeed, top job search site.

Since March, however, that number has fallen back to the pre-COVID mark of 2.9% to 3%.

Bunker says the rise in the number of returning retirees made up for the depressed number of unretirements during the depths of the pandemic in 2020 and 2021.

“Unretirements are unlikely to rise again unless demand for workers spikes,” he says.

Meanwhile, the share of 55- to 64-year-olds working or looking for jobs fell from its pre-pandemic mark of 65.5% to 63.5% in early 2021. But it reached a peak of 66.5% in October on a non-seasonally adjusted basis, Labor Department figures show. Most of those workers likely have simply delayed their retirements amid high inflation, though some probably returned to work after hanging it up, DeAntonio says.

Yet the Morning Consult survey suggests that trend is petering out.

How long does it take to get used to retirement?

Many older employees who left the workforce in the early days of COVID “have grown into retirement,” Wheeler says.

“The longer you’re in retirement, the harder it is to come back,” he says. “Networks (that lead to job interviews) break down….Skills atrophy.”

Or retirees are just having too much fun.

Anita Speck, of Nashville, who retired in June 2022, says she thought about going back to work “for a nanosecond.”

But the former project management leader says in an email, “My company was just starting a major new initiative and I just didn’t have the energy. After 35 (plus) years in the same industry, I needed a break.”

Meanwhile, she adds, “we’re in a fine place financially,” noting that her husband still works and his company provides their health insurance.

At first, Speck, 61, says she wondered “what to do” with her free time.

“Once I created a daily list, I was able to check items off, which gave me a sense of accomplishment. My to-do list is as long as ever.”

Among other things, she says, she spends time with her elderly parents and new granddaughter.

“And the basement still needs (to be) cleaned out!” she says. “I can’t imagine going back.”

Other factors that are keeping COVID-era retirees from coming back to work:

Cooling job market

The job market was torrid last year as employers struggled to find employees, drawing in older workers on the sidelines. But there were 1.3 job openings per unemployed worker in October, still above a balanced market but below the peak of 2 vacancies per jobless worker last year.

And average annual wage growth has slowed to a still sturdy 4.1% from 5.9% in March 2022.

Easing inflation

Yearly inflation has fallen from a 40-year high of 9.1% in June 2022 to a still elevated 3.7% in October, according to the consumer price index. Sharp cost-of-living increases in 2022 and 2023 have helped Social Security recipients at least keep pace with rising prices.

Rebounding stock market

The S&P 500 stock index tumbled 25% through the first eight months of last year, decimating retirees’ 401(k) portfolios. But the benchmark index has jumped 27% since then, largely replenishing nest eggs, though it’s still 4% below its early 2022 peak.

About 22% of retirees say they would consider returning to work because they’re running low on retirement funds, down from 32% in spring of last year.

Wealth inequality widensThe top 1% of American earners now own more wealth than the entire middle class

Return-to-office mandates

After allowing employees to work remotely for much of the pandemic, return-to-office mandates have proliferated. Fifty-one percent of businesses require some or all employees to work in-person, though just 36% of the workers have to come in five days a week, according to a ResumeBuilder survey in August.

Another 39% of employers plan to force employees to return to the office at least some of the time by the end of 2024.