More people forced into ER and early social security

[MichaelB]

Forced to retire, some take Social Security early - Yahoo! News
It is one of the most striking fallouts from the bad economy: Social Security is facing a rare shortfall this year as a wave of people like Skidmore opt to collect payments before their full retirement age. Adding to the strain on the trust are reduced tax collections sapped by the country's historic unemployment — still at 9.5 percent.
More people filed for Social Security in 2009 — 2.74 million — than any year in history, and there was a marked increase in the number receiving reduced benefits because they filed ahead of their full retirement age. The increase came as the full Social Security retirement age rose last year from 65 to 66.

Nearly 72 percent of men who filed opted for early benefits in 2009, up from 58 percent the previous year. More women also filed — 74.7 percent in 2009 compared with 64.2 percent the previous year .

This is bad news any way you look at it. Unemployed now, and by taking early social security will see a permanently lower income stream. If they are able to return to work, their social security benefits will be taxed.

A year ago I thought more people would accept lower paying jobs to avoid this. Clearly this is not the case – because the jobs aren’t there. And when (or if) jobs do begin to appear again, they are less likely to be available to older folks.

 

[ziggy29]

This is bad news any way you look at it. Unemployed now, and by taking early social security will see a permanently lower income stream. If they are able to return to work, their social security benefits will be taxed.

A year ago I thought more people would accept lower paying jobs to avoid this. Clearly this is not the case – because the jobs aren’t there. And when (or if) jobs do begin to appear again, they are less likely to be available to older folks.

All of which goes to show why, even though it makes demographic sense, the idea of raising the retirement age for SS needs to be dead on arrival. In a robust job market without age discrimination it makes sense. But in this case, with 17% real unemployment and rampant age discrimination faced by folks over 50, all it would do is create a large class of impoverished "young old" who are too young for SS and too old to get hired. With all the talk about "boomerang children" who move back in with Mom and Dad because they can't find a job, we may see "boomerang parents" forced to move in with their kids -- assuming their kids have jobs.

It's not something many people want to hear, but the lack of jobs (with no apparent driver for jobs in the foreseeable future) leads me to believe the extended family living arrangement will be making a comeback.

 

[nun]

People are always saying that we need to do something about SS to keep it solvent. It usually involves raising the retirement age.....but why not reduce the age and reduce the benefit. Given the statistics in the OP it might be a way of reducing overall cost to the SS administration and making people happy too, at least until they realize they don't have enough to live on.

 

[dex]

All of which goes to show why, even though it makes demographic sense, the idea of raising the retirement age for SS needs to be dead on arrival. In a robust job market without age discrimination it makes sense. But in this case, with 17% real unemployment and rampant age discrimination faced by folks over 50, all it would do is create a large class of impoverished "young old" who are too young for SS and too old to get hired.

True

 

[nun]

With all the talk about "boomerang children" who move back in with Mom and Dad because they can't find a job, we may see "boomerang parents" forced to move in with their kids -- assuming their kids have jobs.

It's not something many people want to hear, but the lack of jobs (with no apparent driver for jobs in the foreseeable future) leads me to believe the extended family living arrangement will be making a comeback.

This sounds like a good thing to me. Reduce SS age (say 55) and benefits
and move in with the children and look after the grand kids. Denser living arrangements would make better use of resources and we'd have more close knit families.....hang on I just described the Waltons.

 

[nun]

Like Skidmore, 63-year-old Jan Gissel of Tustin, Calif., also was forced into retirement early. She turned to unemployment benefits when her technical support business failed and filed for Social Security last September. Together, the checks are keeping her afloat.
"I knew I had to have an income from somewhere, and my business wasn't giving it to me," she said. "I just went online and, boom, three weeks later I had the check."
Gissel wants to continue working but still hasn't found a job. Although she didn't expect to be cashing Social Security checks so soon, she's grateful for the support it has provided.
"I needed it way earlier than I thought," she said.

These paragraphs stood out to me because this small business woman seems to have no personal retirement savings. This is the norm and leads to the use of statements like "forced into early retirement". It's easy for ER forum posters to be smug about this, as we are either very frugal, well paid or both, but something really has to change to fund retirement in an economy with 10% unemployment.

 

[harley]

This is bad news any way you look at it. Unemployed now, and by taking early social security will see a permanently lower income stream. If they are able to return to work, their social security benefits will be taxed.

A year ago I thought more people would accept lower paying jobs to avoid this. Clearly this is not the case – because the jobs aren’t there. And when (or if) jobs do begin to appear again, they are less likely to be available to older folks.

I'm not so sure it is bad news from a longer term macro level. If more people take SS early and then go back to work, won't that lessen the draw on SS in the future? Not to mention the additional taxes paid when they do go back to work. I suspect older folks who go back to work when the economy gets better will want to keep working for a long time since they have recently and personally felt the effects of being without income. The way to avoid them getting stuck like this would be to do a SS reset, but I'm not sure they'll be able to save the money to do it in that short amount of time.

 

[MichaelB]

I'm not so sure it is bad news from a longer term macro level. If more people take SS early and then go back to work, won't that lessen the draw on SS in the future? Not to mention the additional taxes paid when they do go back to work. I suspect older folks who go back to work when the economy gets better will want to keep working for a long time since they have recently and personally felt the effects of being without income. The way to avoid them getting stuck like this would be to do a SS reset, but I'm not sure they'll be able to save the money to do it in that short amount of time.

Problem is there is a declining likelihood of getting jobs for people in forced early retirement and early social security. Lack of economic growth, age discrimination, loss of skill.

 

[FIREd]

It's easy for ER forum posters to be smug about this, as we are either very frugal, well paid or both

You make it sound as if frugality was not a choice...

 

[nun]

see what I mean about smugness

 

[teejayevans]

It's not something many people want to hear, but the lack of jobs (with no apparent driver for jobs in the foreseeable future) leads me to believe the extended family living arrangement will be making a comeback.

If true, it means housing is will continue to be depressed for a long time to come.

TJ

 

[clifp]

Multi generation families living on reduced social security, food stamps, and unemployment insurances, with their houses in foreclosure and no hope of future employment.

I think I'll watch an upbeat move like Schindler's lList

 

[FIREd]

Multi generation families living on reduced social security, food stamps, and unemployment insurances, with their houses in foreclosure and no hope of future employment.

I think I'll watch an upbeat move like Schindler's lList

I watched a Dateline video this week-end about poverty in America. They focused on south eastern Ohio. There was one case where 14 family members (3 generations) were living in granny's house and their only source of revenue was granny's social security check...

msnbc.com Video Player

(see part 3 of the "friends and neighbors" video)

 

[chinaco]

Whether they realized it along the way or not... these people over spent in their younger years (assuming the lack of a job is not temporary).


The tough reality is that the day of reckoning has come for many boomer retirees... as it will for many more in the next 20 years. Americans have been over spending in their younger years (living above their long-term means). Their future standard of living will be lower. To try to keep it near the previous level, they can continue working as long as they can... but they are much less likely to get a job with the same replacement wage. Many will need to stop work because of health problems as they age.

The moral of this story is save early and live within one's long-term means. Better yet, plan for a potential unexpected events such as forced early job loss which translates to a plan of LBYM (at a young age) to mitigate the risk. If things workout in their favor... they may be able to FIRE.


The sad fact is that many people who wind up in really bad circumstances got there because of no plan what so ever. They just kept spending! Those who planned and saved may not be where they had hoped... but are likely in a much better position.

At least many boomers have pensions... it will be much worse for the next generation unless they get their financial life in order.

 

[rescueme]

If true, it means housing is will continue to be depressed for a long time to come.

TJ

I certainly hope so...

 

[nun]

Whether they realized it along the way or not... these people over spent in their younger years (assuming the lack of a job is not temporary).


The tough reality is that the day of reckoning has come for many boomer retirees... as it will for many more in the next 20 years. Americans have been over spending in their younger years (living above their long-term means). Their future standard of living will be lower. To try to keep it near the previous level, they can continue working as long as they can... but they are much less likely to get a job with the same replacement wage. Many will need to stop work because of health problems as they age.

The moral of this story is save early and live within one's long-term means. Better yet, plan for a potential unexpected events such as forced early job loss which translates to a plan of LBYM (at a young age) to mitigate the risk. If things workout in their favor... they may be able to FIRE.


The sad fact is that many people who wind up in really bad circumstances got there because of no plan what so ever. They just kept spending! Those who planned and saved may not be where they had hoped... but are likely in a much better position.

At least many boomers have pensions... it will be much worse for the next generation unless they get their financial life in order.

I agree with a lot of your post, but don't put all the blame on people for the impending disaster. Sure, people should spend less, but the destruction of the defined benefit pension plan is a major component of the problem and that's down to employers wanting to boost profits and take compensation away form employees to give to shareholders. It worked for a while, but was as shortsighted as spending recklessly.

 

[BTravlin]

I watched a Dateline video this week-end about poverty in America. They focused on south eastern Ohio. There was one case where 14 family members (3 generations) were living in granny's house and their only source of revenue was granny's social security check...

msnbc.com Video Player

(see part 3 of the "friends and neighbors" video)

Southeastern Ohio is on the fringe of Appalachia where this type of thing isn't uncommon unfortunately.

 

[rescueme]

At least many boomers have pensions...

I would suggest that statement should be modified to say that those "boomers" that worked in the public service (e.g. government related) area have pensions (e.g. defined benefit).

Those of us (yes, I'm an "early boomer") who worked in the private sector and over the years my (and my DW's) defined benefit plans were eliminated in favor of the "superior " 401(k) vehicle...

 

[nun]

the "superior " 401(k) vehicle...

so by vehicle you mean Yugo or Pinto right

 

[ziggy29]

the "superior " 401(k) vehicle...

See also: "It's not to *replace* pensions, but to supplement them..."

Yeah, right.

 

[nun]

See also: "It's not to *replace* pensions, but to supplement them..."

Yeah, right.

the 401k is the biggest ever con played on the American workforce.

 

[REWahoo]

Hey, it worked for me...

 

[MichaelB]

the 401k is the biggest ever con played on the American workforce.

Why is the 401(k) a con?

 

[SunsetSail]

the 401k is the biggest ever con played on the American workforce.

I completely disagree from my perspective, although I understand how someone in a different situation could agree with this point of view. I knew before I graduated college that I would not receive a pension unless I decided to w*rk for the government - corporate pensions were pretty already gone. I understood the implications of not having a pension (many family members w*rked in government jobs and some were already retired at the time) and made sure I took that into account when choosing a position (increased salary, vacation, etc. over gov't). I am happy that I was able not to be locked into working somewhere until I was 55 or older to get 'full benefits'. The 401k (along with regular taxable savings) provides me with the flexibilty to FIRE earlier and with less restrictions.

An example of this difference is going to w*rk with a Big 8 accounting firm as a tax professional in the 70s or 80s versus taking a government tax auditor position. At the time you would receive a pension at both places and would start off with a 25% to 35% higher salary with the government. The trade off being the resume prestige and huge potential salary in the future.

Fast forward to late 90s, no more pensions at the now Big 5 accounting firms but salaries were now 25% to 35% higher than government with typical annual percentage increases in double digits. Depending on your goals I see the late 90s as a time with more choice so long as you understand the trade offs.

Just to make sure I'm not being misunderstood - pensions are absoultely great, but they are not necessarily for everyone in all circumstances.

I don't think the 401k is a con on workers. Pensions were creating massive burdens on companies because of increased longevity so they needed to go so that companies could stay globally competitive and be around to hire our kids and grandkids. 401ks or taxable savings could be used to purchase annuities if someone wants to mimic a pension.

 

[ziggy29]

the 401k is the biggest ever con played on the American workforce.

The 401K itself isn't a con. The "con" was the bait and switch played on the (mostly non-union, private sector) workers who were told it was going to be a great way to *supplement* pension and SS income. As it turned out Big Business was all too happy to use it as a *replacement* for pensions -- which has put many retirements in danger of either happening later or not happening at all. We're in a tough stretch trying to adjust to that new reality.

But that's not the fault of the 401K concept itself.