Seniors’ job losses, early retirements hurt Social Security
US sees 23% rise in applications
WASHINGTON - Big job losses and a spike in early retirement claims from laid-off seniors will force Social Security to pay out more in benefits than it collects in taxes the next two years, the first time that’s happened since the 1980s.
The deficits - $10 billion in 2010 and $9 billion in 2011 - won’t affect payments to retirees because Social Security has accumulated surpluses from previous years totaling $2.5 trillion. But they will add to the overall federal deficit.
Applications for retirement benefits are 23 percent higher than last year, while disability claims have risen by about 20 percent. Social Security officials had expected applications to rise from the growing number of baby boomers reaching retirement, but they didn’t expect the increase to be so large.
What happened? The recession hit and many older workers suddenly found themselves laid off with no place to turn but Social Security.
“A lot of people who in better times would have continued working are opting to retire,’’ said Alan J. Auerbach, an economics and law professor at the University of California at Berkeley. “If they were younger, we would call them unemployed.’’
Job losses are forcing more retirements even though an increasing number of older people want to keep working. Many can’t afford to retire, especially after the financial collapse demolished their nest eggs.
Some have no choice.
Marylyn Kish turns 62 in December, making her eligible for early benefits. She wants to put off applying for Social Security until she is at least 67 because the longer you wait, the larger your monthly check. But she first needs to find a job.
Kish lives in tiny Concord Township in Lake County, Ohio, northeast of Cleveland. The region, like many others, has been hit hard by the recession.
She was laid off about a year ago from her job as an office manager at an employment agency and spends hours each morning scouring job sites on the Internet. Neither she nor her husband, Raymond, has health insurance.
“I want to work,’’ she said. “I have a brain and I want to use it.’’
Kish is far from alone. The share of US residents in their 60s working or looking for work has climbed steadily since the mid-1990s, according to data from the Bureau of Labor Statistics. This year, more than 55 percent of people age 60 to 64 are still in the labor force, compared with about 46 percent a decade ago.
Kish said her husband gets early benefits. She will have to apply, too, if she doesn’t soon find a job. “We won’t starve,’’ she said, “but I want more than that.’’
Nearly 2.2 million people applied for Social Security retirement benefits from the start of the budget year in October through July, compared with just under 1.8 million in the same period last year.
The increase in early retirements is hurting Social Security’s short-term finances, strained from the loss of 6.9 million US jobs. Social Security is funded through payroll taxes, which are down because of so many lost jobs. The Congressional Budget Office is projecting that Social Security will pay out more in benefits than it collects in taxes next year and in 2011, a first since the early 1980s, when Congress last overhauled Social Security.
Social Security is projected to start generating surpluses again in 2012 before permanently returning to deficits in 2016 unless Congress acts again to shore up the program. Without a fix, the $2.5 trillion in Social Security’s trust funds will be exhausted in 2037. Those funds have been spent over the years on other government programs. They are now represented by government bonds, or IOUs, that will have to be repaid as Social Security draws down its trust fund.
President Obama has said he would like to tackle Social Security next year.
“The thing to keep in mind is that it’s unlikely we are going to pull out [of the recession] with a strong recovery,’’ said Kent Smetters, an associate professor at the University of Pennsylvania’s Wharton School. “These deficits may last longer than a year or two.’’
About 43 million retirees and their dependents receive Social Security benefits. An additional 9.5 million receive disability benefits. The average monthly benefit for retirees is $1,100, while the average disability benefit is about $920.
The recession is also fueling applications for disability benefits, said Stephen C. Goss, the Social Security Administration’s chief actuary. In a typical year, about 2.5 million people apply for disability benefits, including Supplemental Security Income. Applications are on pace to reach 3 million in the budget year that ends this month, and even more are expected next year, Goss said.