Will the Pandemic Accelerate or Postpone Retirement?
This blog post was contributed by Christina Cutlip, senior managing director of client engagement and national advocacy at TIAA.
A crisis like the one we’re going through tends to leave an imprint both physically and mentally. Employees’ financial outlook have been especially affected as they’ve either experienced a worst case scenario or realized that bad outcomes can actually happen. Past experience tells us that after a significant financial crisis people tend to postpone retirement. However, the unique nature of this pandemic could affect expected retirement behaviors differently for certain employees.
Implications for the Future
TIAA Institute research going back to the 2008-09 crisis provides us with some insight to past retirement expectations. Senior tenured faculty members, regardless of whether they were looking to retire at a traditional age or work past that age (also known as reluctant retirees), reported that financial considerations tied to the 2008-09 recession had increased their expected retirement age. According to Paul Yakoboski, senior economist at the TIAA Institute, colleges and universities can expect a decrease in retirements as financial considerations change faculty expectations.
Unfortunately, this may add to the many ongoing challenges facing colleges and universities. The “reluctant retiree” phenomenon was already a complex issue for higher education institutions trying to manage and renew their workforce. With faculty members working later into their careers, fewer opportunities exist for younger faculty to pursue the tenure track. This challenge adds to the headwinds facing higher education institutions and how their business leaders approach potential cost-saving actions.
The current crisis has had a profound impact and a majority of higher education institutions surveyed by TIAA said they are planning or considering early retirement or retirement incentive programs. In addition, almost 7 in 10 institutions have or expect to lay off employees. Even tenured relationships are being talked about with 24 percent having considered or considering reviewing them.
A Time for Reflection
The uncertainty and distress we’re living thorough is a cause for self-reflection by many, and TIAA’s Financial Resiliency Survey found that 78 percent of respondents said that COVID-19 has changed their views about what’s important in life. A similar re-assessment is very likely to also apply to tenured faculty approaching or already past traditional retirement age. This re-assessment could alter expected retirement plans.
As fall classes have returned, faculty members may have a new outlook on their work. Many likely have safety concerns related to teaching in person, some may not be enthusiastic about having to adapt to a virtual teaching model, and others may be sensitive to the fiscal challenges facing their institutions. These and other changes may be enough to nudge faculty towards retirement sooner than planned. However, as mentioned earlier, many may feel they aren’t ready to retire from a financial perspective.
Getting Retirement Ready
For faculty members who had originally planned on working into their seventies, creating a retirement plan and evaluating their readiness may not have been a priority. Higher education institutions, with the help of their retirement providers, have an opportunity to re-engage with these faculty members about retirement.
Retirement readiness shouldn’t be a guessing game. Running the numbers is critical to understanding if somebody is likely to have enough monthly income to last throughout retirement. That’s why it’s so important to encourage faculty members to calculate how much retirement income they can expect. Many may be pleasantly surprised to find out they are ready for retirement now and they may just need help in implementing a retirement income plan.
For those not ready for retirement, it’s important to put a plan in place that includes steps needed to transition into retirement. That means identifying ways to boost short-term savings, learning how to manage expenses in retirement, generating guaranteed income for essential expenses, accounting for retiree health care expenses and other issues. The reality is that higher education institutions offer generous and comprehensive retirement plans that put faculty in a strong position to retire. If not ready for retirement now, many faculty members are likely to find that retirement security can be attainable in the near future with a solid plan.
We’ve also come to understand that retirement isn’t just a financial decision for faculty. There are also psychological and social considerations that come into play. Faculty members delaying retirement are frequently worried about losing ties with their institutions, not being able to continue their research efforts, or missing out on engaging with or mentoring students, among other concerns. Simply put, they worry about losing access to the community they have been part of throughout their career. Providing access to resources for retired faculty, both within and outside the community, goes a long way in allaying those fears. Addressing these sensitivities and helping faculty prepare for and understand their retirement readiness can ease reluctant retirees into a secure and fulfilling retirement during these challenging times.
 Yakoboski, Paul, “How will COVID-19 affect faculty retirements?” TIAA Institute Voices of Expertise and Experience: Insights to Inform COVID-19 Responses (June 2020).
 TIAA 2020 Survey, “Key Insights and Sentiments: A pulse on how higher education is moving forward in the wake of the pandemic.”
 TIAA 2020 Financial Resiliency Survey.
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