The Great Early Retirement is coming, but what is it?
The Great Resignation was the phenomenon caused by the Covid-19 pandemic starting in 2020, because workers realized that working conditions were not adequate in many cases, and above all, that they could work at distance and better distribute your time between personal and work.
This phenomenon boosted wages to a certain extent, since companies did not have the necessary human resources to carry out their activities.
The boost in wages, in turn, ended up increasing inflationary pressures and, with it, interest rates throughout the planet, with the intention of moderating the general growth of prices.
The Great Early Retirement spreads throughout the world
Now another phenomenon emerges that also raises alarm bells around the world: retirements have skyrocketed during and after the pandemic.
Data from the San Luis Federal Reserve show that, in 2022 alone, around 2.6 million retirees were registered, a figure much higher than expected in official projections. Many of these people were of retirement age; that is, 65 years old, but many of them are not.
Beyond that, in the United States it is or was common for people to work until they are 70 years old, at least before the pandemic, when all the rules in the labor market were changed.
But with more consolidated figures, a recent study by the Pew Research Center indicates that The Baby Boom generation has been managing their retirement benefits since 2008 upon reaching 62 years of age.
Furthermore, between 2008 and 2019, the 55-year-old population retiring early increased, growing by 3.5 million workers, something never seen before.
But the trend does not seem to be exclusive to the United States, in Europe nations such as Spain, Italy, Germany, the Netherlands, the United Kingdom and France (in this country last year’s riots were generated precisely by the reforms to pension laws), It also seems that the phenomenon is beginning to consolidate.
We are all tired
The same study indicates that among the reasons why retirements or pre-retirements increased, the following stand out: concern for health, physical and mental exhaustionas well as the increase in the value of its assets.
The Great Early Retirement has caused the average retirement age in some segments of the population in the United States to decrease during this decade, and is now approaching 60 years. The average is 62.5 years to be exact.
One of the main problems is that life expectancy is increasing, even considering the effects of the Covid 19 pandemic, when life expectancy decreased in many nations.
The Great Pre-Retirement and the Treasury
The above poses enormous challenges, even for large industrialized nations.
To not go too far, let’s take the example of the United States. According to projections made by Bloomberg, with data from specialists, the country’s fiscal deficit, which is currently around 98 percent as a proportion of GDP, at this rate will be 114% by 2030, 130 percent by 2040 and 150 percent cent only a decade later in the year 2050.
What would be the cause of this advance in the fiscal deterioration of the largest economy on the planet?
There would actually be several causes, but an important one would undoubtedly correspond to the pension burden.
If this will happen in the largest economy on the planet, it is not very difficult to imagine what will happen in other nations.
Younger retirees, States that want to pay a higher pension
To the Great Early Retirement that is observed in many parts of the world, adds to the intense debate that exists today in many nations regarding the retirement age and the increase in pensions.
While the classic current indicates that workers should retire at an increasingly older age, precisely because of the increase in life expectancy, the rise of populism in various parts of the world generates a contrary current that advocates early retirement and, in addition, the increase in replacement rates (pensions determined by the percentage of salary enjoyed at the time of retirement).
While the debates continue, the fundamental problem that pensions represent for the public finances of practically all countries in the world has not been resolved.
Antonio Sandoval Director Pensiones Dignas, editor, collaborator at Alto Nivel and Prensario; editorial director of magazines in the energy sector, advisor and financial analyst.