By Don Azarias
For those who are part of the baby boomers, “normal” retirement age traditionally starts at age 65. In 1983, it was raised to 66 and, finally, to 67. However, in the early 1960s, Congress allowed people to begin drawing lower Social Security benefits as early as age 62.
These days, two thirds of those on Social Security begin drawing benefits well before normal retirement age. It’s not really a choice they make voluntarily; not in this kind of economy. It’s just because they are unemployed and, due to their advanced age, are deemed too old to compete in the job market. Consequently, a forced early retirement is their only option and that would mean drawing Social Security checks well before their full retirement age.
Many Americans are delaying retirement as a result of the debilitating economic impact to their financial security. Many have seen their savings and 401(K) balances decimated by the recession. Those seniors and older people who were still working but got laid off were forced to draw Social Security much earlier than they had planned.
According to an analysis by Steve Goss, chief actuary for the Social Security Administration, about 200,000 more people filed initial claims in 2009 and 2010 than the agency had predicted before the recession and he said the trend most likely continued in 2011 and 2012, though that is harder to quantify. The most likely reason is joblessness.
Drawing Social Security early like for people who are 62 years old find themselves at financial disadvantage during their retirement. By collecting four years shy of full retirement age, a retiree will receive a reduced monthly benefit for the rest of his life. Those who collect early get 20 to 30 percent less a month than they would get if they waited until full retirement age, which varies by year of birth.
Alicia H. Munnell, director of the Center for Retirement Research at Boston College, had this to say to underscore the importance of not taking an early retirement: “The most potent lever that individuals can pull in trying to get themselves a secure retirement income is to postpone claiming Social Security.”
According to government report, as recently as a decade ago, half of those eligible claimed Social Security at age 62. But that share has been falling because people are living longer and still want to work as well as shore up retirement funds. However, those laid-off older workers are forced to claim early because of unemployment. And it’s a sad reality that, after losing a job, an older worker tend to have a much harder time landing another one than his younger counterpart.
In an analysis presented by Richard W. Johnson, director of the retirement policy program at the Urban Institute, 37 percent of older workers who lost their jobs between 2008 and 2011 and did not return to work ended up claiming Social Security as soon as they turned 62.
The Institute of Public Policy Research (IPPR) has found that approximately 100,000 people over the age of 50 will be forced to take early retirement, as they are not able to find employment.
Figures show that nearly 25% of people who have been without work for more than two years are in the over 50 age bracket. People who lost their jobs at the beginning of the recession and are still unemployed, will have to consider the fact that they may never find employment again and be forced to start drawing their pensions. Starting their pensions at a much younger age than intended would mean that their pension fund was considerably lower than they had wanted and many people will face a poverty-stricken retirement.
Past reports have found that unemployed people over 50 are ten times more likely to still be out of work after two years. More worrying is the statistic that for an older man, each year out of the workplace that shows it becomes 24.3% less likely to find work again.
The IPPR’s Chief Economist, Tony Dolphin, had this to say: “Almost a quarter of those who have been unemployed for more than two years are over 50. The risk is that older people who have been out of work for this long stand little chance of ever working again. This means many will be forced into early retirement, which will mean a lower standard of living during their old age.” Mr Dolphin also said that those who find themselves unemployed for long periods of time could well find themselves “shut out of the jobs market”, as they lose necessary work skills as well as self-confidence when it comes to interviews.
It’s really a tough option for those older unemployed workers. Forced to retire and unable to find work, a vast majority of them take lower Social Security checks early just to stay afloat. There’s no other way for them to avoid poverty during retirement. And, as most of us know, the reason why the Social Security was created is to provide a comfortable life for seniors after their working days are over.
From the time the Social Security Act was signed into law by President Franklin Delano Roosevelt in 1935, it marked the beginning of a new era for all Americans. The term “social security” was coined to refer to any program that was intended to help unemployed workers and individuals who have little or no financial resources at all. Prior to Social Security, the elderly workers were consigned to the life of poverty upon retirement. It looks like history is bound to repeat itself.