Instead of seeing older workers staying on the job longer as the economy has worsened, the Social Security system is reporting a major surge in early retirement claims that could have implications for the financial security of millions of baby boomers.
Since the current federal fiscal year began Oct. 1, claims have been running 25% ahead of last year, compared with the 15% increase that had been projected as the post-World War II generation reaches eligibility for early retirement, according to Stephen C. Goss, chief actuary for the Social Security Administration.
Many of the additional retirements are probably laid-off workers who are claiming Social Security early, despite reduced benefits, because they are under immediate financial pressure, Goss and other analysts believe.
The ramifications of the trend are profound for the new retirees, their families, the government and other social institutions that may be called upon to help support them.
On top of savings ravaged by the stock market decline and the loss of home equity, many retirees now must make do with Social Security benefits reduced by as much as 25% if they retire at age 62 instead of 66.
"When the recession ends and the economy bounces back, there may be a band of people for whom things will never be the same again. They'll still be paying the price for 10, 20, 30 years down the road," said Cristina Martin Firvida, director of economic security for AARP, the nation's largest membership organization for people 50 and older.
The full consequences of retirement decisions made in hard times will become apparent when people who retired early begin to exhaust their savings.
"As they get into their 70s and 80s, it will be increasingly inadequate," said Alicia H. Munnell, director of the Center for Retirement Research at Boston College.
The most severe effect will probably fall on the unemployed widows of workers who retire early, Munnell said. Survivors' benefits also take a deeper cut when people retire early -- reduced as much as 30% for retirement at 62. Because women tend to live longer than men, that leaves them more vulnerable to running out of money as expenses for assisted living and other costs rise in advanced old age.
You think the boomers are screwed? Wait 'til you see the Gen X'ers try to retire. My Social Security statement shows I'm projected to receive benefits that would barely cover property taxes in my town. Never mind little things like food and utilities. And Gen X doesn't have pensions (government worker overclass excepted). Some diligent Gen X'ers max out their 401(k)s -- but the $15,500 max won't provide much of a comfortable retirement unless they started in their 20's and are fortunate to get long-term investment returns well above the rate of inflation. And they are starting in a hole after the investment returns of the last 10 years.
So we do what our parents did -- buy a house and hope perpetual asset inflation will bail us out. Hope that the great Ponzi scheme lasts one more generation.
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