Applications for retired worker benefits were up 25 percent in the first half of 2009 compared to fiscal year 2008, according to the Social Security Administration, which had predicted only a 15 percent year-over-year increase due to aging baby boomers starting to retire and more women claiming benefits based on their own working records.
Recession Forces More Baby Boomers to Claim Social Security Early
The Social Security Administration attributes the unexpected surge in early benefit applications to the recession, which has led to layoffs for many older workers while simultaneously decimating their retirement savings and reducing the value of their homes.
Initial Gain from Early Social Security Claim Can Lead to Long-Term Loss
Applying for Social Security benefits at age 62—the earliest age at which workers are allowed to claim Social Security benefits—can provide immediate income for baby boomers and seniors who are struggling financially. Unfortunately, people who choose to take Social Security benefits before reaching their full retirement age will see their monthly benefits permanently reduced.
As an example, people who claim their benefits at age 62 in 2009, instead of waiting until their full retirement age at 66 (full retirement age varies depending on when you were born), will receive 25 percent less money in their monthly Social Security checks. If they live a long life, that monthly reduction could add up to a lot of lost income over the next 25 or 30 years. [Using the online calculators provided by Social Security to determine your benefits and your break-even age can help you decide how claiming your benefits early may affect your future.]
Fortunately, the unexpected increase in early applications for Social Security benefits isn’t likely to shorten the solvency of the Social Security system. Even though Social Security administrators estimate a 5-10 percent increase in benefit applications, and more money will be paid out sooner due to the early claims, the corresponding reduction in those benefits is expected to even things out and to prevent any significant long-term impact on the system.
