Dee Dix hesitated before she decided to retire in 2012.
“I thought, do we have enough money? How much do we need?” the 66-year-old former insurance analyst said from her home in Fort Myers, Fla. “I was a little bit leery.”
Clinching the decision was profit earned on stock investments during a five-year bull market that has restored $14 trillion to U.S. equity values. Ms. Dix is among millions of baby boomers whose retirement has helped push the participation rate of working Americans to lows not seen since the 1970s.
Some people leave the labor pool and retire after giving up on the job search. Others, like Ms. Dix, pay for it with the proceeds of rallying stocks. Joblessness and labor participation levels reaching pre-recession lows are stoking debate among Federal Reserve policy makers and politicians about what's behind the swings in data underlying the most important economic barometer, employment.
(See also: SHelping baby boomers transition into retirement)
“This issue of participation in the labor force is a highly contentious one,” said John Ryding, chief economist and co-founder of RDQ Economics in New York. He has also worked at the Federal Reserve Bank of New York. “This is not some abstract discussion about sociology or demography, it's really a discussion about interest rates. The stakes are huge.”
AGING BOOMERS
What's not in dispute: the sheer size of the aging baby-boomer generation and that an unprecedented demographic shift distorts statistics. It means, for instance, that retirees can play a significant role in the shrinking labor force even as people are staying on the job longer than ever. About 8 million people aged 65 and older are working, a 72% jump from a decade ago.
It is the sharp rise of departing retirees from the workforce in the past two years that suggests more is at play, according to an analysis by Shigeru Fujita, a senior economist at the Federal Reserve Bank of Philadelphia. While demographic trends have headed this way since about 2000, retirees became a more prominent block of the drop in the participation rate in 2010, and then grew to account for 80% of the decline since early 2012, he found.
Last year's 30% surge in the Standard & Poor's 500 Index capped a bull market now in its sixth year, while the benchmark gauge reached a record high this month. Wealth has trickled into 401(k) accounts and home valuations, tempting those who may have delayed retirement during the financial crisis, said financial adviser Jay Barish.
“Everyone u! nderstands that the market went crazy last year,” said Mr. Barish, who advises 155 clients as a partner at Murphy Matza Wealth Management in Raleigh, N.C. “If they're not in love with their career, the natural question is, 'Can I go?' That emotion absolutely ebbs and flows with a client's perceived bottom line.”
The U.S. jobless rate fell below 7% at the end of last year for the first time since 2008, helped by an exodus of retirees that has shrunk the labor force, Mr. Fujita wrote in his analysis, revised in February. Unemployment dropped even further in April, to 6.3%.
Top Income Stocks To Own For 2015
Since the start of the bull market in 2009, the number of those 55 and older leaving the workforce has increased by more than 2% each year, the fastest clip since the technology bubble of 2000 and outpacing a 10-year average rate of 1.3% through 2008, according to the Bureau of Labor Statistics. In 2008, growth for the same age bracket was 1.4%, a slower increase than the previous year's 1.7% gain, the data show.
ECONOMIC RECOVERY
Those numbers dovetail with the broader economic recovery, prompting Drew Matus, deputy U.S. chief economist at UBS Securities, to posit that boomers put retirement plans on hold during the depths of the financial crisis and have been revisiting those plans since.
Household wealth in the U.S. climbed by $2.95 trillion in the final three months of 2013 to an all-time high. Average 401(k) balances almost doubled from 20
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