Edward Conard

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Upside of Inequality Oxford Unintended Consequences

AI Summary. The US has roughly 2.7m more retirees than predicted by a Federal Reserve Bank of St. Louis model, with the number of retirees reaching a post-pandemic record. Financial market performance appears to have played a role, as stocks rebounded 24% and home prices rose across most US metro areas, bolstering older Americans' wealth.

Alexandre Tanzi Bloomberg
Date Posted:

Retirements are rising again in line with American equity markets. According to @mfariacastro, the US has seen 2.7mm “excess” retirements.

Are rising stock and home prices pushing more Americans into retirement?

Core argument: The US has roughly 2.7 million more retirees than predicted by a model built by St. Louis Fed economist Miguel Faria-e-Castro, with the number of retirees reaching a post-pandemic record in December.

Economists long expected the share of retirees in the population to soar as baby boomers aged. Covid-19 then caused the number to spike well beyond expectations, a surge dubbed the “Great Retirement Boom.” But just as they seemed to be coming back down, the numbers surged again in recent months, reaching a post-pandemic record in December. The US now has around 2.7 million more retirees than predicted in a model designed by Miguel Faria-e-Castro, an economist at the Federal Reserve Bank of St. Louis. Financial market performance looks to have played a role. The gap in the model appeared to be closing earlier last year following a 19% drop in the S&P 500 in 2022. But in 2023 the index rebounded, jumping 24%, with most of the gain coming in the fourth quarter. On top of that housing across the vast majority of US metro areas continued to rise last quarter, bolstering the wealth of older Americans.

Takeaways by Macro Roundup® AI

  1. The US has roughly 2.7 million more retirees than predicted by a model built by St. Louis Fed economist Miguel Faria-e-Castro, with the number of retirees reaching a post-pandemic record in December.
  2. The gap in Faria-e-Castro's model appeared to be closing after the S&P 500 fell 19% in 2022, but the index rebounded 24% in 2023, with most of that gain in the fourth quarter.
  3. Housing prices across the vast majority of US metro areas continued to rise in the most recent quarter, bolstering the wealth of older Americans.

Related Articles:

  • Excess Retirements Continue Despite Ebbing COVID-19 Pandemic — The share of U.S. adults who are retired rose above its predicted trend during the COVID-19 pandemic, with excess retirees peaking at an estimated 2.95m and standing at roughly 2.4m thereafter. The authors suggest these excess retirements may be contributing to continued labor market tightness and a low unemployment rate.
  • Pandemic Labor Force Participation and Net Worth Fluctuations — The shortfall in U.S. labor force participation relative to its pre-pandemic peak is attributed mostly to a decline in participation among workers older than 55. The authors estimate that wealth effects from rising net worth can explain between 20% and 36% of the 3.3m excess retirements over the full period studied.
  • Retirements, Net Worth, and the Fall and Rise of Labor Force Participation — Households aged 55–74 lost an average of over $100,000 in net worth amid falling asset returns, reversing part of their earlier gains, reflecting their large holdings of stocks and bonds. The authors estimate this decline in asset values may have drawn an extra 170,000 people aged 51–65 back into the labor force.
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