The Covid-19 recession, like all recessions, threatens the wealth and retirement security of millions of workers. Job loss prompts people to stop saving, raid their nest eggs or go into debt by falling behind on their rent and mortgage payments. Most workers nearing retirement had insufficient retirement savings even before the recession, and many planned to delay retirement and work longer to save more. But the Covid-19 pandemic and recession made that hopeful plan to work longer even more difficult.

Older Workers: Joblessness and Dropping Out

Even in normal times, the older workers have a harder time finding new jobs after leaving or being tossed out of work. In addition to a virus that puts older workers at much higher risks of death or disability, the “virus recession” put about 3 million jobless older workers at higher risk of never finding another job. About 7.4% of the 38 million older workers would be working today if the economy was as strong as it was in January 2020.

Older workers (ages 55 and over) were hit harder than mid-career workers (ages 35 to 54) in the initial rough phase of the pandemic recession between March and April. The nation enjoyed a partial recovery between May and August, but older workers’ labor force participation rate kept on falling since. The older labor force participation rates reached their lowest point in January 2021.

During 2020, the Covid-19 pandemic and recession forced 1.9 million older workers out of the labor force. During the same period, the labor force participation of mid-career workers declined by less than 2%. When we add the 1.1 million unemployed older workers who were unemployed in January because of Covid-19 to the 1.9 million who were out of labor force, we estimate 3 million older workers who would have been employed today if not for the Covid-19 pandemic and recession.

The recovery also seems to be much slower for older workers, if it is happening at all. The participation rate of mid-career workers (ages 35-54) slipped just 0.5 percentage points between August 2020 and January 2021 relative to the January 2020 pre-pandemic rate. During the same time, older workers’ participation rate dropped by about 3 percentage points.

What is happening to older workers makes Covid-19 a retirement story. Some of these older workers will return to the labor force in coming months and years, but older workers who return to the labor market after a prolonged absence are likely to face earnings cuts in their new jobs. Older workers who cannot return will be forced to retire early even though they are not prepared for it.

The good news for older workers is that the Social Security Administration data does not show any substantial increases in claiming Social Security benefits early. This is probably thanks to the increase in unemployment benefits and stimulus checks that helped unemployed older workers delay claiming their retirement benefits. But the recession is not over, and if we fail to continue supporting those who are affected, the situation may change for those who are experiencing long-term unemployment.

The Covid-19 Recession Will Likely Short-Change Retirement Savings

The initial March 2020 losses in the stock market have since recovered by March 1 2021, so the portfolios of those who did not withdraw their savings when asset prices were at their lowest point did not suffer from the recession. But flows into retirement accounts matter as much as rates of return.

We still do not know much about the overall impact of the Covid-19 on retirement savings because contribution rates are wobbly. Reports from Vanguard and Fidelity show that many workers who kept their jobs were able to maintain their contribution rates or even increase them.

On the other hand, a November 2020 Plan Sponsor Council of America poll of employers about how the Covid-19 crisis affected their retirement policies found that roughly 9% of employers have suspended or reduced retirement contributions for their employees, with the largest reduction (12%) among firms with fewer than 50 workers.

These cuts will still affect millions of workers. As the report notes, “if only 10 percent of the roughly 600,000 employers that currently offer workplace retirement plans suspended or reduced their contributions, the long-term impact on retirement security would be significant.” As of November, we were just a hair shy of that number.

We know even less about what happened to retirement savings of those who lost their jobs. Because of how dysfunctional our retirement system is, many low-income workers (who are hit the hardest by the recession job loss) were not even covered by a plan while working.

Almost half of these low income workers did not have any retirement savings to begin with. But exactly because they do not have any savings, unemployment means they stop paying their mortgage or rent and accumulate more debt. This additional debt will prevent them from saving for retirement when they start working again or will remain with them going into retirement and keep eating from their already small retirement income.

The drastic job loss experienced by older workers in the wake of the Covid-19 crisis reveals the risk older workers face when working longer is the policy substitute for an effective retirement security system.

Older Workers Can’t Go It Alone

One of the many warning signs of the oncoming retirement crisis is how often people are told to fix it on their own: save more, work longer. Since the recession is K-shaped, the strategy of working longer and saving more is available only to the lucky few who had substantial 401(k) savings and other assets. The rest of workers (which is not surprisingly the majority of them) can only rely on timely and effective economic policy. Without the stimulus payments and expanded unemployment benefits, the situation could be much worse right now, but the recession is not over yet.

Because Covid-19 is a retirement story, immediate policy support is still necessary for older workers who have lost their jobs, as well as systemic reforms to end retirement insecurity for generations to follow. The former includes reinstating early withdrawal penalties (and providing real support to those facing financial difficulties instead), lowering the Medicare eligibility age, increasing and extending unemployment benefits, and enforcing anti-age discrimination regulations.

Much-needed systemic reforms include expanding Social Security and creating Guaranteed Retirement Accounts that give workers access to a secure and accessible way to save for their retirement and supplement their Social Security benefits.