November 16, 2023

The Great Retirement

The Great Retirement


The recent phenomenon of the "Great Retirement" in the United States, significantly influenced by the COVID-19 pandemic, presents a notable shift in the labor market, especially among Americans over the age of 65. This impacts both retirees and non-retirees—resulting in widespread implications for the entire economy.

The pandemic is directly responsible for an unexpected increase in the number of retirees. As of September, there are approximately 2 million more retirees than were predicted pre-pandemic​​​​.i This is primarily due to:

  • Many older workers chose retirement to avoid the health risks associated with continued employment.
  • The economic downturn catalyzed by the pandemic led many companies to offer early retirement packages as a cost-cutting measure.
  • While there was an economic downturn, the pandemic also led to a surge in asset values (e.g., real estate and stocks), providing a financial buffer for many nearing or at retirement age—making retirement more feasible for some in this population.
  • Remote work wasn’t possible for all workers, including older workers in certain industries. For some, this led to a preference for retirement over adapting to new work models.

As a result of these trends, we are seeing lower labor market participation rates, challenges in reentering the workforce, and shifts in retirement patterns for older Americans:

  • The labor market participation rate for workers aged 65 and older was approximately 21% before the pandemic. It has since dropped to 19%.
  • Many older Americans are finding it increasingly difficult to rejoin the workforce due to skill atrophy, weakened work connections, and ageism. The average time to find employment for people aged 65 and older was approximately 32 weeks in 2022ii, which is significantly longer than the overall average (approximately 20 weeksiii).
  • Un-retiring has become less common than it was before the pandemic.


Client Impact

Ultimately, the long-term implications for those aged 65 and older, a group that was disproportionately affected by the pandemic, are unclear. This leads to greater uncertainty among these individuals, especially when it comes to the ability to participate in the labor market. These changes also reflect a deeper reassessment of work-life balance and retirement decisions among Baby Boomers.

Of course, the effects of the Great Retirement are not limited to Baby Boomers. The increased number of retirees and the decreased rate of labor market participation by those aged 65 and older has implications for non-retirees and the broader economy:

  • Labor shortages: certain sectors may experience labor shortages, which can lead to increased demand for younger workers, possibly improving job opportunities and wages.
  • Increased workload: non-retirees might face increased workloads and responsibilities to compensate for the reduced workforce. This could lead to higher stress and burnout.
  • Shift in skills: as older workers retire, there will be a loss of experienced, skilled labor. As a result, companies may need to invest more in training and development for existing employees to fill this gap.
  • Intergenerational wealth transfer: the retirement of a large segment of the population could accelerate the transfer of wealth to younger generations—potentially impacting investment patterns and consumer spending.
  • Economic growth: a smaller workforce can affect overall economic productivity, however, if retirees are financially secure, their spending can continue to contribute positively to the economy.
  • Social Security and pension systems: more retirees and lower workforce participation will put increased strain on Social Security systems and pension funds, potentially leading to reforms or changes in retirement benefits.
  • Healthcare and social services: an aging population may demand more healthcare and social services, which will impact public spending and require more workers in these sectors.

Overall, the Great Retirement has and will continue to have significant impacts, both positive and negative, on the U.S. economy and population.


Given that the Great Retirement affects Americans of all ages, Financial Professionals (FPs) must consider the effects on both clients aged 65 and older, as well as those outside of that cohort. However, in this post, the focus will only be on clients aged 65 or older.  For this population, several behavioral finance insights are relevant, but three are of primary interest: the wealth effect, happiness, and social dynamics.

The Wealth Effect

The wealth effect refers to the psychological phenomenon whereby people spend more as the value of their assets rises. This effect is often observed during periods of increasing real estate or stock market values (as was the case during the pandemic). When individuals perceive themselves as wealthier due to the increased value of their assets, they are more likely to spend, believing they have more disposable income. This can lead to less prudent financial behavior if the asset values decline later.


  1. Make older clients aware of this effect. Most clients will be unaware of this psychological finding and, as a result, unaware that their increased feeling of wealth may just be a cognitive illusion—one that will disappear when asset values decrease. This stresses the importance of having a long-term financial plan that remains stable in the face of short-term market fluctuations.
  2. Show these clients visuals summarizing potential outcomes should (when) asset values decline. Show them projections for the most likely outcomes (based on historical data) and the worst-case scenario. Showing them a projection that assumes above-average values, or a continuation of the current trend will only increase the wealth effect and potentially suboptimal financial decision-making as a result.


Understanding what makes clients happy can reap rewards for clients and FPs. Given that the pandemic led many Baby Boomers to reassess their priorities in life, understanding what may be driving (or not driving) their decisions is important to ensure they achieve their financial goals (whether new, revised, or existing). Behavioral research on happiness has many interesting and important implications for financial decision-making.

For example, many people underestimate the context in which experiences occur. As a result, individuals may think that retirement will bring them more happiness than it actually will. This is because of something called hedonic adaptation whereby people adapt to their new circumstances incredibly quickly (it can be as little as two weeks). While initially individuals may have a strong emotional response to retiring, this response will quickly and completely subside (i.e., retiring vs. being retired). For some individuals, this will mean they feel less happy or fulfilled than they believed they would be.iv


On the other hand, studies of day-to-day happiness have found that the things that make us most unhappy are: the morning commute, working, and the evening commute. These are all things related to non-retirement. So, in terms of day-to-day happiness, most people will be happier retired than not. However, after those three things, activities that make us most unhappy on average include housework, non-work computer time, shopping, and cooking—all things that will continue in retirement.v


  1. Before deciding whether to retire, it may be worthwhile to have clients take stock of their motivations. It is important that clients understand the reality of retirement--especially as un-retiring becomes increasingly more difficult. Having clients perform experience sampling—asking people who are retired how they feel and what their day-to-day looks like—can help with some of the biases involved with predicting happiness. This may be crucial because deciding to retire for the wrong reasons can affect a client’s financial plans, ability to unretire, and overall well-being.

Social Dynamics

Some clients may be adversely affected by social influence when deciding to retire or how to behave during retirement. First, some clients may want to retire simply because so many others in their generational cohort are. This is driven by both herding and social comparisons. For the former, clients may feel that retirement is the right choice simply because others are doing it, not because of an objective evaluation of their financial situation. For the latter, people can determine their own happiness or life satisfaction based on comparisons to similar others. If many around them are retiring, they may feel less happy with their situation because when they compare their life to those around them, they don’t feel as well off.


  1. Guide clients considering retirement or a change in financial plans to go through their financial plans and situation in detail. This can serve as a “reality check” that counters social factors.
  2. For social comparisons, it can be important to present cold, hard facts: by the age of 65 approximately 50% of Americans are still working, and even at the age of 69, 30% of U.S. adults are not retired.

Ultimately, reaching out to older clients during this period of unprecedented retirement is important, whether they are already retired, considering retirement, or planning to remain non-retired. Regardless of retirement status, clients aged 65 and older will be navigating increased uncertainty due to the changing economic and social landscape, will need additional help with retirement savings management, will need assistance understanding future healthcare costs and with general longevity planning, and will need reassurance in the ability of their financial plans to adapt to both personal and broader economic changes.


Atlas Point

Atlas Point can help you quickly and easily identify which of your clients are most prone to the behavioral tendencies discussed above. While it may be worthwhile to reach out to any clients aged 65 and older, there are clients who may be in need of extra support—those experiencing a wealth effect (which can be proxied for using the Recency Bias) and those prone to herding or the fear of missing out (FoMO). You can assess clients for several behavioral finance biases, including recency and herding, using our signature Financial VirtuesTM survey. You can try our Financial VirtuesTM survey here.

Atlas Point also has several Pulse Checks™ that can help you determine whether a client has a particular behavioral bias and the strength of that bias:

·      Fear of Missing Out (FoMO) (this will indicate whether a client may be swayed by social factors when making financial decisions)

·      Recency (this will measure whether a client is making decisions based on recent trends vs. long-term historical data).

End Notes

[i] Alex Tanzi. “Millions of Retired Americans Aren’t Coming Back to Work as Predicted.” Wealth Management, 8 Nov 2023,



[iv] Frederick, S., & Loewenstein, G. (1999). 16 Hedonic adaptation. Well-Being. The foundations of Hedonic Psychology, edited by D. Kahneman, E. Diener, 302-329.

[v] Kahneman, D., Krueger, A. B., Schkade, D. A., Schwarz, N., & Stone, A. A. (2004). The day reconstruction method (DRM). Instrument documentation.