Seniors grit teeth, take early benefits

Social Security applications surge By Bonna Johnson • THE TENNESSEAN • June 8, 2009 At age 63, Clara Mathews was three years shy of when she wanted to retire; then the factory where she'd spent her entire career shut down. Mathews was laid off. "I couldn't find a job that paid me even half of what I was earning," said the now 66-year-old Murfreesboro woman, who used to work at General Electric's shipping dock overseeing the appliance motors that were shipped out and the parts that came in. Despite misgivings, Mathews elected to take her Social Security benefits early to help make ends meet. People like Mathews coping with financial setbacks are among the main reasons why new data show a surprisingly dramatic increase in the number of applications for retirement benefits. Instead of older workers simply postponing retirement as the economy worsens, more people are retiring early when they lose their jobs and, out of financial necessity, entering the Social Security system before they're eligible to receive their full benefits. In Mathews' case, that meant getting a check for $200 less in benefits each month, about $1,200 instead of what could have been $1,400 monthly. Social Security officials had projected 2009 retirement applications to be 15 percent higher than last year, primarily because of more baby boomers aging into the system, according to a report by Stephen C. Goss, chief actuary at the Social Security Administration. But actual data show an increase of about 25 percent, he said. "I wasn't ready for it and wasn't happy about it," Mathews said of her early retirement in November 2006. "I would still be working there (at GE's facility) if it were open." The earliest someone can start receiving Social Security payments is age 62, but the penalty for doing so is about a 25 percent reduction in benefits. To receive full benefits, a retiree has to wait until full retirement age. For Mathews, that would have been this year; she was born in 1943. "It was a hard decision," Mathews said. "I thought that would be a good time to retire and start traveling." But because her Social Security check is smaller now, she has cut some things out of her budget, including vacations. Mathews said she spends much of her time exercising at the gym or tending to her gardens. She also gets a GE pension. Decision may prove costly"I think right now people are desperate," said Janice Overton, a Nashville certified financial planner who specializes in retirement planning. And Overton worries about the long-term consequences for workers like Mathews. "I often say don't let a short-term need drive a long-term decision," Overton said. "These are decisions you can't take back." These retirees may end up having to go back to work to supplement their Social Security benefits or downsize their lifestyle in their retirement years, Overton said. "If you don't have a long life span, you might be OK, but if your family has a history of living long, eventually it's going to catch up with you," she said. Filing early has other implications, including reduced Social Security benefits for spouses and survivors, Overton said. A large majority of workers, some 75 percent, take retirement before their full retirement age, she added. More early retirements come as the Social Security system faces steep financial challenges even apart from the deep U.S. recession. In a report issued last month, Social Security trustees said the program would start paying out more in benefits than taxes collected by 2016. And the trustees project that the trust fund will be depleted by 2037 — four years earlier than the previous projection. Social Security officials don't expect the latest surge of applicants to further affect the long-term solvency of the retirement program because the monthly benefit payments early retirees get are lower for life. "These sorts of changes often occur in cycles, so the increase this year is likely to be offset by a decrease in a future year when the economy is in a relative boom period," said Melissa Favreault, a senior research associate who studies Social Security at the Washington-based Urban Institute, a nonpartisan economic think tank. Older workers vulnerableStill, Favreault is concerned about the impact early retirements may have on families. "Families who feel they can afford to retire early now may find themselves financially strapped later in life, when they are likely to be less able, or perhaps completely unable, to return to work," she said. Overton said many older workers are vulnerable to the recession. It takes them longer to find jobs, and they often don't have labor union contracts to protect their seniority. Employers also are getting stingy with severance packages, and not providing career transition assistance when they let workers go, she said. Sandra Goad, who turns 62 in August, said she is being thrust into the Social Security system earlier than she would have liked after losing a couple of jobs and experiencing health problems. Unable to find work, the Nashville woman expects to file for bankruptcy, sell her home and move into government-subsidized senior housing. "I have my plan. I just need everything to fall into place," she said. Goad estimates her Social Security benefits will be $1,000 a month, about $170 less than if she had waited until age 66. "I went ahead and filed last week," Goad said. "It's the only choice I have."