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The numbers are less than encouraging. The trend is even worse.
According to the U.S. Bureau of Labor Statistics Job Openings and Labor Turnover Summary released earlier this month, more than four-and-a-half million people quit their jobs in the most recently reported month (November 2021). Specifically, the report says:
“Quits are generally voluntary separations initiated by the employee… The number of quits increased in November to a series high 4.5 million (+370,000). The quits rate increased to 3%, matching the series high in September. Quits increased in several industries with the largest increases in accommodation and food services (+159,000); health care and social assistance (+52,000); and transportation, warehousing, and utilities (+33,000). The number of quits increased in the Northeast, South, and Midwest regions.”
Some feel this is merely the aftermath of the nation’s two-year bout with Covid.
“This is a knee jerk reaction to a tumultuous time,” says Guy Baker, Founder of Wealth Teams Alliance in Irvine, California. “It may have prompted some who wanted to retire, but were reluctant to do so, to take action. But for others, who need to keep working, they may change their minds and return to the workforce.”
If you think this is only due to the onset of the pandemic, the year-over-year figures aren’t encouraging. The Bureau’s Quits levels and rates by industry and region, seasonally adjusted Table shows the number of “Quits” rose by nearly 1.3 million people compared to twelve months earlier (November 2020 at 3.296 million vs. November 2021 at 4.527 million). That’s an increase of nearly 40 percent.
What is the cause of this “Great Resignation” and what do the underlying numbers reveal?
“It comes down to supply, demand, and choice,” says Paul Swanson, Vice President, Retirement at Cuna Mutual Group in Madison, Wisconsin. “There are roughly 10 million open jobs and 7 million unemployed workers. There are 3 million more open jobs than unemployed people. And there is no doubt that there are a lot of open jobs that the 7 million unemployed aren’t qualified for, so the deficit is in reality much worse than 3 million. This gives people choices. The choice to seek remote work, flexible schedule, higher wages, better environment, greater satisfaction, move to another part of the country, etc. And workers are voting with their feet. They will come back but employers will have to compete for workers unlike in the past. Not only to recruit new employees but to retain those that they already have.”
Before you jump onto this bandwagon, however, you might want to consider what you might be giving up.
Jason Field, Financial Advisor at Van Leeuwen & Company in Princeton, New Jersey, says the biggest risk you face is “not understanding the benefits you are giving up and what benefits you may be gaining by switching jobs or leaving the work force. Healthcare and retirement benefits are some of the more overlooked aspects of an employment package.”
How do you guard against any unexpected surprises that come with your newfound freedom? Field suggests you “be sure to fully review your current benefits and compare them to potential new employers to make sure you are maintaining adequate benefits. There is typically a transition period before new benefits kick in at a new employer. Generally, someone would have to wait 30 to 90 days after you begin a new job before their full benefits start. It is very important to time the coverages appropriately.”
At least if you’re transitioning from one employer to another, you know there’s a light at the end of the tunnel. If, on the other hand, you seek to retire, well, that’s when things really get tricky. You’ll need to be fully engaged in the intricacies of the Big Three: Health Care; Social Security; and your Retirement Assets.
“Many employees do not understand the full cost of health benefits until they lose them,” says Susan Lubow, Employee Benefits and Retirement Plans Co-Leader at BakerHostetler in Columbus, Ohio. “Employers often subsidize 75% or more of health benefits and exiting employees may not realize the full extent of this benefit. Upon departure, they will most likely elect continuing health coverage for a period of time through COBRA, but the typical cost is 102% of the total cost of coverage which is a huge increase in the cost that an individual will have to bear.”
Health care, or more specifically, health insurance, will likely produce an increase in expenses for those leaving work before traditional retirement age (and maybe after, too). You might think you can rely on Social Security to fill this gap, but that’s not necessarily guaranteed, especially if you’re retiring early. Don’t be among those who miss this unanticipated hazard.
“The most overlooked risk is Social Security maximization,” says Chris Gure, an Investment Consultant in Charlotte, North Carolina. “These strategies have been up for debate in Washington the last few years and can make a huge difference to someone who is retiring. Making sure you get the most income is crucial to a successful retirement plan.”
If you’ve not yet reached the magic age of 59½, things start getting really dicey, no matter how much money you’ve saved in your tax-deferred retirement accounts.
“Many employees joining the Great Resignation don’t know their 401(k)s and retirement plans won’t be able to support them without significant tax penalties if they’re under 59,” says Jeffrey Zhou, Co-Founder & CEO of Fig Loans in New York City. “That’s because these programs rarely have provisions for early retirement. If someone wants to join the Great Resignation, they must have some unqualified funds, like those in a money market account or savings account that they can rely on for the interim. This is an essential part of retirement planning that most people miss when they retire early.”
Regardless of your age, you might not be eligible to receive everything you think your have in your corporate retirement plan.
“If workers have not been paying attention to vesting requirements under their retirement plans, any employees that have been employed for a shorter amount of time may find that a portion of their retirement plan will be forfeited by their termination,” says Lubow. “Many 401(k) plans have vesting provisions, such as a requirement to be employed three years to be vested in any portion of an employer match or other employer contribution, or perhaps a plan provision that applies a gradual vesting period over a period of five years. Any employees who have not met the vesting requirements will lose that portion of their retirement plans.”
If you’re thinking of taking part in the Great Resignation, you need to ask yourself several questions and search hard for the answers that match your own personal circumstances.
“Make sure you are financially stable enough to make a move and are creating the right financial situation for your family,” says Field. “Common questions are: Do I need to work? How much more do I need to make? When can I start claiming Social Security, pension, and other retirement benefits? All of these answers should be clear before making the jump.”
The Great Resignation represents a great opportunity. With that opportunity comes risk. It’s always best to look before you leap.
But, if you own your own business, should you be loving or hating the Great Resignation?
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