COVID-19 has caused a record number of jobless claims, led the U.S. into a recession, and left millions of Americans coping with reduced hours. But the effects of the novel coronavirus aren't hitting everyone equally. Not only are older workers more likely to face health risks as morbidity rates rise with age but they're also experiencing more severe economic consequences because of it.
If you're one of the millions of Americans nearing retirement age but still in the workforce, it's essential to understand the economic risks the virus presents, both now and in the future, so you can be better prepared to withstand or overcome any negative financial consequences over the long term.
Older workers are more likely to be unemployed and less likely to work at home
COVID-19 has left millions of Americans of all ages unemployed, but workers 55 and over have been especially hard hit. In fact, workers in this demographic saw unemployment jump from 3.3% in March to 13.6% in April and 11.8% in May, with only workers under age 34 faring worse, according to U.S. Bureau of Labor Statistics data.
Older workers not only were more likely to lose their jobs than their middle-aged counterparts but they are also significantly less likely to work in positions they can do from home. And because they face a greater threat from COVID-19, many near-retirees have been faced with a choice of risking exposure or giving up income they're depending on.
Pre-retirees facing these challenges will statistically take longer to find new work, which only exacerbates the long-term financial consequences of unemployment.
This can mean a devastating loss of retirement wealth
The loss of a job can be devastating at any age, but especially later in life.
Pre-retirees as a group generally sock away cash more aggressively for their later years than their younger counterparts, with workers age 50 and over making higher contributions than younger people at the same income level. Workers also become eligible to make "catch-up contributions," or larger deductions to a 401(k) or IRA, only after age 50. All of this means unemployment in your 50s or 60s could have an especially big impact on your retirement account balance.
Most people also follow a predictable pattern in their careers, earning less when starting out and more in the later years of their working life. Since your Social Security benefits are determined based on average wages in the 35 years your inflation-adjusted earnings were highest, a job loss late in life can have an outsized impact on the value of your benefits if you miss out on some years of peak earnings.
Sadly, some pre-retirees will also end up reducing Social Security benefits by claiming early if they're unable to find new work after losing their jobs. And with COVID-19 officially pushing the country into a recession, the chances of this undesirable outcome have only increased.
What can you do so COVID-19 doesn't ruin your retirement?
If you're one of the millions of older Americans left unemployed by COVID-19, it's imperative you take steps to mitigate the damage.
First and foremost, this means taking advantage of expanded unemployment benefits if you're eligible. Coronavirus relief bills have provided an extra $600 in weekly benefits above state maximums through July 31 and pre-retirees who have been laid off should claim them ASAP and consider contributing as much as they can afford from these benefits to retirement accounts.
When possible, you may also want to persist in finding a new job and, if necessary, working a little longer than planned. This can give you more time to make retirement contributions and could potentially help you raise your Social Security benefits both by increasing average wages over your career and enabling you to delay claiming benefits.
These steps will unfortunately require sacrifice, and it's troubling that older people are being disproportionately damaged both economically and physically due to coronavirus. But since you can't change these realities, all you can do is prepare for them as best as you can to shore up your long-term security and ensure COVID-19 doesn't leave your retirement dreams unfulfilled.