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Archive for Monday, August 9, 2010

Job losses strain Social Security

Forced to retire, some workers tap benefits early

August 9, 2010

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— Paul Skidmore’s office is shuttered, his job gone, his 18-month job search fruitless and his unemployment benefits exhausted. So at 63, he plans to file this week for Social Security benefits, three years earlier than planned.

“All I want to do is work,” said Skidmore, of Finksburg, Md., who was an insurance claims adjuster for 37 years before his company downsized and closed his office last year. “And nobody will hire me.”

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.

Jason Fichtner, an associate commissioner at the Social Security Administration, said the weak economy has led more people who lost their jobs to retire early. However, it also has forced some people hard-hit by the recession and in need of a bigger paycheck to push back retirement and stay in the work force longer.

“But we’re seeing more people taking early benefits than staying in the work force longer,” Fichtner said.

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.

Payouts exceed revenue

In the annual report of the Social Security program released Thursday, the trustees said that pension and disability payments will exceed revenues for this year and 2011, reflecting the deep recession.

The report forecast that the program would return to the black in 2012 through 2014, but that benefit payments will again exceed tax collections in 2015. For every year after 2015, the report projects that Social Security will be paying out more than it receives in tax collections as 78 million baby boomers begin retiring.

The trustees did not focus on the growth of early retirees in their report, as they don’t expect the early retirees to significantly drain funds over the long-term. Early opt-ins receive smaller monthly checks so that they aren’t projected to receive any more money over a lifetime than they would if they had waited to collect Social Security until their full retirement age.

People entitled to full benefits at 66 would receive 75 percent of their check if they began collecting four years early. Conversely, if they waited until they turned 70, collecting four years late, they would earn 32 percent more.

They would receive the decreased — or increased — percentages for the rest of their life.

“From the trustees’ perspective it’s a wash, because they calculate you’ll get the same total benefit,” said Maria Freese, director of government relations and policy at the National Committee to Preserve Social Security and Medicare.

Freese added, though, that beneficiaries generally only opt in early because they have to.

“When you retire early, you are taking a hit in your monthly check, and most people don’t do that voluntarily,” she said. “They either do that because they aren’t healthy enough to keep working or because they lost their job.”

Degrees of choice

Nora Lopez, 62, of Hialeah, Fla., retired from her job as an elementary school teacher last year and began collecting Social Security. She did so, in part, because of health problems. When her school district offered teachers the option of keeping their health insurance coverage until they qualified for Medicare at 65, she decided she could get by on her pension and Social Security.

“I wanted to work as long as I could,” she said. “But it was hard for me to do that.”

For some, it’s simply a matter of doing the math that prompts them to cash in early. Jack Dixon, 63, of Naples, Fla., stopped working full-time in April as a trolley driver and tour guide, cutting back to one day a week. He decided to do it after his wife figured out they’d be able to get by even with the reduced Social Security benefit.

“Why should I go out there to the hustle and bustle and stress and all the stuff that’s related to work if I don’t have to?” he asked.

Comments

jmadison 4 years, 4 months ago

The politicians raids on the Social Security trust fund is one of the biggest frauds in history. They make Madoff look like a piker. The politicians will pitch the meme that its the fault of the ordinary citizens for attempting to claim the benefits they have paid for during their working careers. The AP, as usual, has used this meme in this article with no mention of the rapacious behavior of the politicians of both parties.

Richard Heckler 4 years, 4 months ago

"Until 1984, the trust fund was "pay-as-you-go," meaning current benefits were paid using current tax revenues. In 1984, Congress raised payroll taxes to prepare for the retirement of the baby boom generation. As a result, the Social Security trust fund, which holds government bonds as assets, has been growing. When the baby boomers retire, these bonds will be sold to help pay their retirement benefits.

If the trust fund went to zero, Social Security would simply revert to pay-as-you-go. It would continue to pay benefits using (then-current) tax revenues, and in doing so, it would be able to cover about 70% of promised benefit levels. According to analysis by the Center for Economic and Policy Research, a 70% benefit level then would actually be higher than 2005 benefit levels in constant dollars (because of wage adjustments). In other words, retirees would be taking home more in real terms than today's retirees do. The system won't be bankrupt in any sense. "

Richard Heckler 4 years, 4 months ago

Top 5 Social Security Myths

Myth #1: Social Security is going broke.

Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.6 trillion surplus (yes, trillion with a 'T'). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever.

After 2037, it'll still be able to pay out 75% of scheduled benefits—and again, that's without any changes. The program started preparing for the Baby Boomers' retirement decades ago. Anyone who insists Social Security is broke probably wants to break it themselves.

Myth #2: We have to raise the retirement age because people are living longer.

Reality: This is a red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than they did 70 years ago. What's more, what gains there have been are distributed very unevenly—since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half. But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.

Myth #3: Benefit cuts are the only way to fix Social Security.

Reality: Social Security doesn't need to be fixed. But if we want to strengthen it, here's a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come. Right now, high earners only pay Social Security taxes on the first $106,000 of their income. But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.

Myth #4: The Social Security Trust Fund has been raided and is full of IOUs

Reality: Not even close to true. The Social Security Trust Fund isn't full of IOUs, it's full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States. The reason Social Security holds only treasury bonds is the same reason many Americans do: The federal government has never missed a single interest payment on its debts. President Bush wanted to put Social Security funds in the stock market—which would have been disastrous—but luckily, he failed. So the trillions of dollars in the Social Security Trust Fund, which are separate from the regular budget, are as safe as can be.

A ton of very smart wealthy citizens invest in these treasury bonds.

Myth #5: Social Security adds to the deficit

Reality: It's not just wrong—it's impossible! By law, Social Security's funds are separate from the budget, and it must pay its own way. That means that Social Security can't add one penny to the deficit.

Defeating these myths is the first step to stopping Social Security cuts.

Flap Doodle 4 years, 4 months ago

You are forgetting that attribution thing again, merrill. Or are you claiming to be the author of the material you are posting?

Richard Heckler 4 years, 4 months ago

It appears as though once again wayyyyyyyyy too many of our elected officials are among the most uninformed group in america.....

" What impact would the privatization plan have on the national debt? Unless taxes are raised, the government will have to borrow up to $4 trillion over the next 20 years to make up the money that is drained out of the system by private accounts.

Social Security privatization will raise the size of the government's deficit to nearly $700 billion per year for the next 20 years, almost tripling the size of the national debt.

How will the rest of the U.S. economy be affected if a privatization plan is enacted?

Put simply, moving to a system of private accounts would not only put retirement income at risk--it would likely put the entire economy at risk.

The current Social Security system generates powerful, economy-stimulating multiplier effects. This was part of its original intent. In the early 1930s, the vast majority of the elderly were poor. While they were working, they could not afford to both save for retirement and put food on the table, and most had no employer pension.

When Social Security began, elders spent every penny of that income. In turn, each dollar they spent was spent again by the people and businesses from whom they had bought things. In much the same way, every dollar that goes out in pensions today creates about 2.5 times as much total income.

If the move to private accounts reduces elders' spending levels, as almost all analysts predict, that reduction in spending will have an even larger impact on slowing economic growth.

The current Social Security system also reduces the income disparity between the rich and the poor. Private accounts would increase inequality--and increased inequality hinders economic growth. For example, a 1994 World Bank study of 25 countries demonstrated that as income inequality rises, productivity growth is reduced.

Market economies can fall apart completely if the level of inequality becomes too extreme. The rapid increase in income inequality that occurred in the 1920s was one of the causes of the Great Depression."

yankeevet 4 years, 4 months ago

Didnt u get a new ringer on your cell phone???

Flap Doodle 4 years, 4 months ago

My cell phone goes "ring-ring" (which is the default sound for that phone) when somebody calls me. It does not post large blocks of quoted text without attribution.

just_another_bozo_on_this_bus 4 years, 4 months ago

And it makes you whine-- but at least you're good at it. (Practice makes perfect.)

BigAl 4 years, 4 months ago

Ohhh Tom. I was about to congratulate you on a post without mentioning the "Annointed One" and then you have to go and spoil it. And you were so close!!!

BigAl 4 years, 4 months ago

You do have a point. I so hope we come out of this soon and I don't care who gets the credit...... or blame.

rbwaa 4 years, 4 months ago

The thing that is being ignored in this discussion is that many seniors taking retirement early have also experienced depleted pension funds following the crash of 2008-2009. Therefore many of them will live in poverty when they must rely on social security as their only income.

George Lippencott 4 years, 4 months ago

Merrill

OK. Facts.

But fact – where is the money coming from when the outgo exceeds the income? That will happen in a few years. Trillions of dollars from the general fund. So they are right, too

The proposals to increase the age stem from a long term solution when we hit the point where we exhaust the non-existent trust fund. We do it like we did it last time moving full term benefits from 65 to 67. Each year the retirement age increases by a fraction of a year until we reach 70.

By all means tax the wealthy without increasing their benefits. The program is already means tested so there should be no problem doing that. Except the loony right will scream.

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