Unemployment Hitting Older Americans Worse Than Younger Americans
You might think that during a major recession, older workers would be the first to go. They command higher salaries, require greater healthcare payments, and just cost a company more across the board. But in every recession through the 2008 financial crisis, Americans above the age of 55 were actually less affected by unemployment than those in younger age cohorts. That has changed during this most recent crisis, and that could have profound ramifications for your retirement.
How Recessions Affect Age Cohorts
In most recessions, the youngest Americans are almost always the worst hit. Those between the ages of 16-24 are often working in entry-level jobs, holding down part-time jobs, or working in industry sectors that can afford to jettison young workers who lack training and work experience. From the 1970s to today, the greatest changes in unemployment during recessions are seen among young workers, with workers between 25 and 54 seeing less rise in unemployment, and those 55 and up seeing the least.
This latest coronavirus-driven crisis has flipped that somewhat. While younger workers are still the worst hit, older workers have been significantly more affected than middle-aged workers this time around. There are some significant reasons for that, which could impact your retirement planning.
More Older Workers in the Workforce
One of the trends in recent decades was that more and more older workers remained in the workforce. In fact, the employment rate among older workers had risen to record-high levels as more older workers kept working. So in that sense the increase in unemployment makes sense, since there are more older workers in the workforce being laid off.
And why were there so many older workers? Well, American households aren’t in the greatest financial shape, and with pensions having long since gone by the wayside, Social Security no longer going as far as it used to, and more Americans reliant on their own savings to fund their retirement, older Americans have to work even longer than previous generations in order to have enough money to retire comfortably. Now, many of those older Americans who had hoped to continue in the workforce long enough to fund their retirements are finding themselves in a tough position, facing an economy with significantly reduced job opportunities, less earning capacity, and more difficult challenges in getting back into the workforce.
The official numbers so far indicate that we’re seeing the worst job market since the Great Depression. The official U-3 unemployment rate is at 14.7%, and would likely be even higher, closer to 20%, if those temporarily laid off were included in the figures. Payroll numbers indicate that even 20% may be a low estimate, with 25-30% or more out of work right now. And even with states starting to open up once again, there’s no indication that many of those out of work right now will receive their jobs back soon, if ever.
Many businesses are at risk of bankruptcy, with larger companies at the mercy of huge debt loads and smaller companies rapidly drawing down dwindling cash holdings. When this entire crisis is over, many businesses won’t be around anymore, which will make permanent many of the current temporary job losses.
What Does the Future Hold?
For older workers who are still in the workforce, the reality of a weakening job market means that any day they could find themselves out of work. Even if they’re planning on retirement years from now, they may be forced into retirement a lot sooner than they planned. So they need to build up their retirement savings as much as they can, as soon as possible. With stock markets weakening and in danger of crashing, that’s easier said than done.
Thankfully there are still assets that perform well during financial crises, such as gold and silver. They tripled and quadrupled, respectively, during the aftermath of the 2008 financial crisis, giving those investors who had the foresight to invest in precious metals some much-needed relief from the financial turmoil that was engulfing the nation. With investment vehicles such as a gold IRA, investors can even roll over assets from existing retirement accounts into a gold IRA, normally without any tax consequences. That allows investors to lock in any gains they’ve already made in stock markets, while protecting their wealth with precious metals.
For older workers who find themselves out of a job, it’s more important than ever to maintain their existing wealth and protect it against loss. With a major stock market crash imminent, those who expect to rely on their 401(k) in the future may be sorely disappointed when that crash occurs. It took most investors years for their retirement accounts to recoup their losses in the aftermath of 2008, and many older workers don’t have enough time to allow that to happen to them.
Here too, gold and silver can play an important role in wealth protection. Gold and silver maintain their value when other assets lose value, and they keep that value for the long haul. A $20 bill from 100 years ago still buys $20 worth of goods, but a $20 gold coin from 100 years ago will bring close to $2,000. That’s how well gold maintains its value.
While there’s a lot of fear and uncertainty out in the workforce today, there doesn’t have to be. With a solid investment plan and a well-diversified investment portfolio that includes precious metals, you can be prepared for whatever happens over the coming months and years.