Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

Social Security applications surge amid job losses

October 2, 2009 | 11:06 am

With job prospects bleak or nonexistent, more older Americans are turning to Social Security earlier than they -- and the government -- had expected.

From Bloomberg News:

The Social Security Administration had projected an increase of 315,000 applicants for the 12 months ending Sept. 30 partly because the first baby boomers -- those born right after World War II -- are starting to retire.

The actual increase was higher. Agency statistics show that 2.57 million people requested benefits, up from the 2.10 million applications received during the previous 12 months.

Socialsecuritylogo That’s an increase of 465,000, or 47% higher than the expected rise.

"We are seeing a significant increase in both retirement and disability applications as a result of the recession," said Mark Lassiter, a Social Security spokesman.

"People have always used early Social Security benefits as a safety net during recessions," said Richard Johnson, a senior fellow with the Urban Institute, a Washington-based research organization. "We’ve seen that in past recessions and it looks like we’re seeing it again."

You can begin drawing on Social Security at age 62, but the benefits are significantly reduced compared with what you’d receive by waiting to draw until you’re 65.

But many people may have no choice but to turn to Social Security at 62, given the dismal job market.

From Bloomberg:

Many of those applying for retirement benefits are unlikely to find new employment and don’t plan to go to back to school to train for a new career, said Paul Van de Water, a former Social Security Administration policy official and now a senior fellow at the Center for Budget and Policy Priorities.

"Investing in additional education is less likely to be profitable when you’re 62 than 42," Van de Water said. "The tendencies at that point are to apply for benefits because you’ve lost your primary source of income."

-- Tom Petruno