The COVID-19 pandemic and resulting recession will force an additional 3.1 million older workers to “experience deprivation,” which will come on top of the millions that are already likely to fall into poverty due to America’s supposedly broken retirement system, according to a new report from the New School’s Retirement Equity Lab (ReLab).
“Older workers are the canary in the coal mine for how the COVID-19 recession affects Americans’ retirement prospects,” ReLab Director Teresa Ghilarducci—a longtime critic of 401k and similar defined contribution plans—said in a statement.
Ghilarducci used the findings to call for the creation of universal pensions for all workers in order to prevent it from happening to future generations.
The report claimed all 67 million older workers will see a 7% to 9% percentage point drop in their retirement replacement rates. The numbers show “that middle-class workers are hit by both market loss and job loss, while some high earners will experience dramatic falls into poverty.”
THE FULL REPORT CAN BE FOUND HERE.
April’s federal jobs report revealed what the New School referred to as a staggering 13.6% rate for workers over 55, ReLab noted. The fastest-growing share of the labor force, older workers face a distinct disadvantage when recessions hit—no time to recover.
Major findings
- Low-earning older workers are more likely to be unemployed in the pandemic’s aftermath. While a large majority were likely to be poor in retirement before the recession, the COVID-19 fallout will push an additional 1 million people from this group into poverty.
- Middle earners sustain both job loss and market loss, leading to an additional 1.1 million older workers falling from the middle class into poverty.
- High-earning older households are a small group, but their retirement is likely to take a bigger hit from market losses. The recession will double the number expected to experience downward mobility into poverty in retirement from 360,000 to 720,000 people.