AI Is Killing Retirements, Not Just Jobs

My friend Tom called me Tuesday morning. He's 56. Twenty-three years at the same company. Senior manager. The kind of guy who knew every system in the building. He got the package on Monday. The meeting lasted nine minutes.

Tom told me he's not looking for work. He's done.

I can't stop thinking about this. Because Tom isn't a one-off. Last month, 97,006 Americans lost their jobs. That's the worst May we've seen since 2020. And the firm that counts these things, Challenger Gray, said something that should stop us cold. AI was the direct cause of 38,579 of those cuts. In a single month. That's a record.

Tech got hit hardest. The sector shed 38,242 jobs in May alone.

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Here's what worries me. The companies doing the firing aren't hiding why. Mark Zuckerberg told Meta staff in plain language this week. The 8,000 jobs being cut? That money is being moved. From people to chips. He didn't dress it up.

Amazon, Microsoft, and Meta plan to spend $725 billion on AI next year. Combined. That's up 77% from this year. The money has to come from somewhere. It's coming from payroll.

I get it. AI is the story of the decade. Our 401(k)s are up because of it. Mine is too. Nvidia, Microsoft, Meta, the whole list. The chart on your screen looks like a staircase to the moon.

But I don't think most people realize who's paying the bill.

It's Tom. It's the guy at the next tee box. It's the woman who ran payroll for fifteen years. It's the engineer who built the system the AI is now replacing.

The package looks good for a few months. Severance, some healthcare, a check. Then the months turn into a year. Then it turns into something else.

Workers 45 to 54 who lose a job stay out of work for 30.7 weeks. That's almost eight months. Eight months of bills. Eight months of pretending things are fine when they're not. Eight months of watching the brokerage statement and doing the math.

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For workers over 50, the picture gets worse. One in four who get laid off never get another job. Not a worse one. Not a part-time one. None.

That's the number I want you to hold onto. One in four.

Tell that to your buddy on the back nine. One in four guys his age who get the box, the speech, and the packet of paperwork never go back to work.

Of the people who've been out more than 24 weeks, 35% are over 55. The data calls them "discouraged." They've stopped looking. They're not in any jobs report. They're just gone.

What happens next is where it gets ugly. They tap the 401(k). Right now, hardship withdrawals are running at 6% of plan members. That's triple the rate before the pandemic. People are cracking open retirement money to pay this month's bills.

Then comes Social Security. The smart move is to wait until 67. The check is much bigger. But Tom told me he can't wait. He needs the money at 62 to cover the mortgage. So he'll take it. And the benefit will be locked in lower. Every month. For the next thirty years.

He's not alone there. A lot of guys his age are making the same call right now.

So here's the part I keep coming back to. The AI rally in our accounts is real. The gains are real. But part of what's funding those gains is the early retirement of people like Tom. His savings. His smaller Social Security check. His next twenty years.

The headline story is that AI is killing jobs. The hidden story is that AI is killing retirements.

Nobody knows how this ends. Wall Street says AI will pay for itself in productivity gains. Maybe it will. The history books will sort that out in twenty years.

But I know what's happening at Tom's kitchen table tonight. He's sitting with his wife. They have a spreadsheet open. They're trying to figure out how to make a 401(k) last thirty years instead of fifteen. They're not job hunting. They're drawing down.

The buddy at the golf course who got the package at 56 isn't waiting for a callback. He's not updating his LinkedIn. He's watching the market open every morning. The brokerage statement is the only thing keeping the lights on.

More on this tomorrow.

— Lauren
Editor, American Ledger

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