Social Security takes double hit from recession retirees

The long recession has seen many late-career job losses, forcing jobless workers to take Social Security earlier than they planned (Associated Press Aug. 8).

Pair the reduced tax collections received from fewer workers with an unexpectedly high withdrawal rate, and the Social Security trust is experiencing a rare shortfall this year.

A record number of workers, 2.74 million, applied for Social Security in 2009, with a marked rise in the number of recipients receiving reduced benefits because they filed before their full retirement age. That age rose to 66 last year. The Social Security Administration indicated that 72% of men, up from 58% the year before, filed for early benefits in 2009. Similarly, 74.7% of women, up from 64.2% the previous year, filed for early benefits.

While many workers retired earlier than planned, others are working longer and postponing retirement because their retirement savings are not up to their financial needs. "But we're seeing more people taking early benefits than staying in the work force longer," Jason Fichtner, an associate commissioner of the Social Security Administration, told Associated Press.

Some late-career unemployed workers are making do with reduced Social Security benefits and unemployment benefits.

The Social Security program released its annual report last week, showing that payments will be more than revenues for 2010 and 2011 as a consequence of the deep recession. The report predicted the program will be back in the black in 2012 through 2014, with benefit payments again exceeding tax collections in 2015. From that year forward, the report projected that Social Security will pay out more than it takes in, as 78 million baby boomers begin retiring.

Still, there is no expectation that early retirees will drain Social Security funds much over time. That's because early claimants receive smaller checks; they ultimately won't receive more money than if they had waited until their full retirement age to collect Social Security benefits.

At a time when no one's job is secure, be proactive if you're still working. Credit Union National Association editors from the Center for Personal Finance made these suggestions:

• Save as much as you can; you need both liquid funds and long-term retirement funds.
• Live below your means; examine every purchase.
• Get an estimate of pension or 401(k) or 403(b) income potential; determine when you will be eligible for retirement.
• Get an estimate of your Social Security benefits from ssa.gov or call 800-772-1213.
• Determine whom you'll be providing for in retirement, and plan for long-term care for any dependents.
• Set a retirement savings goal and make a plan to reach it.