Inflation Forces Many Retirees Back to Work
For three years and counting, Americans have been struggling with high inflation. In February 2021, inflation was reported at just 1.7%. By June 2022, it had soared to a 41-year high of 8.9%. According to the latest Consumer Price Index, inflation currently stands at 3.1%. This is still well above the Federal Reserve’s target rate of 2%. The average American household now spends about $13,000 per year more for the same goods and services they bought three years ago.
One of the hallmarks of this current inflationary cycle is that some of the largest price increases have been on everyday basic necessities – food, clothing, shelter and energy. Since February 2021, food prices have risen a cumulative 20.7%. Clothing prices have increased 9.2% while the cost of shelter has risen 19.2%. Energy prices have surged 27.4%.
Historically, inflation tends to impact retirees and low-income households the most. Over the past three years, these two groups have been hit especially hard. These two demographics typically spend the greatest percentage of their income on basic necessities. As prices on basic necessities continue to soar, lower-income households and retirees have little room to maneuver to avoid these high prices. Food, clothing, shelter and energy are not exactly high-end luxury items you can simply do without. Americans need to buy these items to provide for themselves and their families.
For millions of retirees, inflation has forced them to ponder a very difficult decision. Do they abandon their current dreams of retirement and re-enter the labor market?
According to a survey by employment company ResumeBuilder, one in eight retired Americans will return to work in 2024. The No. 1 reason cited (61%) was inflation and the increased cost of living. For those who will rejoin the labor market, most (59%) said they will search for a job in a different industry than their previous career. 27% stated they would remain in their prior industry but would choose a different employer. Just 14% said they would seek employment with their former employer.
This data reinforces another survey from the Nationwide Retirement Institute (NRI). The NRI noted that 90% of its survey respondents cited inflation as the biggest threat to their retirement security. One-third of all retirees surveyed said they are considering returning to work. 50% of those contemplating a return to work said the fear of running out of money is the primary factor in weighing their decision.
A record-high 4.1 million Americans are expected to turn 65 this year, according to the Retirement Income Institute. That’s roughly 11,200 people per day. Many of these individuals have already joined the ranks of the retired. But based on the latest data, a growing number may soon be dusting off their resume and rejoining the American workforce.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
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