ElderLaw Answers Blog

The financial insecurity of the economic downturn has moved more Americans to value the financial security offered by Social Security, according to a poll recently released by the National Academy of Social Insurance.  While  President Bush could not get much traction even in good economic times for his efforts to privatize Social Security, it looks like he would get even less today.

According to results of the poll, conducted by Benenson Strategy Group, 88 percent of Americans say that Social Security is more important then ever in light of the current economy.  At the same time, they’re worried about the program.  Ninety percent are concerned about its ability to pay benefits to future generations and 44 percent of non-retirees are concerned about it being there for them. 

In what appears to be a new coming to terms with reality, the poll reports that three quarters of respondents agreed that workers should contribute more to the program if necessary to preserve it.  We can hope that this signals a change from the promises of many politicians that American citizens could get something for nothing which have contributed to our nation’s personal and shared budget deficits.

Floyd Norris, writing in The New York Times, points out an unusual and previously unremarked phenomenon of our current recession.  While employment has dropped precipitously for younger workers, it has risen for older workers.

The hardest hit group in actual numbers of jobs is those age 35 to 44, who lost more than one million jobs this past September through November as compared to the same months a year ago.  Those aged 45 to 54 lost approximately 150,000 jobs, less than 1 percent, while those aged 55 to 64 gained more than 550,000 jobs and those between ages 65 and 69 gained 190,000 jobs, increasing their employment by about 6 percent.

These numbers can be easily lost in a focus on the unemployment rate which for men age 65 to 69 increased from 3.4 percent in November 2007 to 5.9 percent in November 2008.  The reason the unemployment rate almost doubled while the number of those employed in this age group increased by 6 percent reflects two trends.  First, women in general are doing better than men, and one the increase in jobs includes both sexes while the unemployment rate is only for men. 

Second, more older workers are postponing retirement or seeking to go back to work due to the drop in their retirement savings.  The unemployment figures reflect the relationship between the number of people seeking work and the number employed.  Those not seeking work a year ago, but now seeking work, can account for a large part of the increase in the unemployment rate despite the increase in actual employment.

While these figures are distrubing in terms of what they mean for our younger workers, they are somewhat encouraging for the Baby Boomers and the future of our economy.  They reflect both their bargaining power within the labor force and the ability of the economy to self-correct to some extent.  There have been dire predictions as to what will happen to the economy when Baby Boomers retire and the number of workers supporting the number of retirees is insufficient to maintain Social Security and Medicare.  The result may be that many Baby Boomers will postpone retirement — whether out of necessity or a desire to keep active — thus improving the ratio of workers to retirees and enabling those working to help support those retired.

According to a recent study released by the Center for Retirement Research at Boston College (http://crr.bc.edu), most men begin drawing on their Social Security retirement benefits at age 62 or 63, rather than waiting until their full retirement age or even age 70.  The early receipt of benefits means that both the husbands and their wives will receive less each month than they would if they waited.

According to the study, written by Steven A. Sass, Wei Sun and Anthony Webb, this early election has no effect on average on the men.  Though they will receive a smaller benefit check each month, this will be offset by the checks they receive between the ages of 62 and normal retirement age.  Of course, this is the average.  Men who are in ill health would do better to take early retirement and men who expect to live a long time should postpone their receipt of benefits for as long as possible.

This is also basically true of single women, meaning on average they do about as well in terms of lifetime Social Security benefits no matter whether they start earlier and get more smaller checks or start later and receive fewer larger checks.

But for today’s seniors, most wives’ benefits are based on their husband’s work record.  If husbands choose to take benefits before the full retirement age, their wives are penalized twice — first while their husband’s are alive when they get a reduced benefit, usually half of the husband’s benefit, and second when the husband dies (which often happens due to women’s greater life expectancy) when they receive their husband’s benefit rather than their own.

So, why do men do this?  Are they cads?  The researchers conclude that they are not, that instead they simply don’t understand the implications of claiming benefits early.  More education may change their behavior, although the researchers note that “financial education has not been especially effective in changing behavior.” As an alternative, they suggest a number of potential policy changes, such as requiring spouses to sign off on the decision to claim Social Security before the beneficiary’s full retirement age.

Interestingly, while the Social Security Administration’s Web site (www.ssa.gov) has a number of excellent calculators to assist beneficiaries in deciding when to retire, none appear to calculate spousal benefits.  Based on the Boston College report, adding such calculators would be a good first step.

To read the report, go to: http://crr.bc.edu/index.php?option=com_content&task=view&id=485&Itemid=4