Michael Wells
by Michael Wells
Mon Sep 28th 2009 at 7:15pm UTC

How Can I Miss You If You Won’t Go Away?

A story in this morning’s news caught me up. Social Security is apparently in trouble because more people than expected are taking early retirement, often after losing jobs and failing to find new ones. This is making demands on S.S. payouts sooner than expected and drawing down the “trust fund.”

But wait a moment, wasn’t the problem last week that boomers weren’t retiring fast enough? The next generation in line is being denied promotions because their elders aren’t quitting fast enough.

It brings to mind the old country-western song, “How can I miss you if you won’t go away?”

The first story:

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 increase 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, Berkeley. “If they were younger, we would call them unemployed.”

The second story:

The financial downturn has left all sorts of casualties in its wake: more unemployment, depressed wages, and greater economic uncertainty. But I’d like to direct my angst at a different target — the baby boomers.

A hidden effect of this crisis is that, in the workplace, as in popular discourse, they simply refuse to get out of the way.

To understand my lament, you have to realize that the oldest of the baby boomers are on the cusp of retirement. For younger generations, this should be a cause for relief. For decades, Gen X-ers like myself have had to hear the standard declarations about the uniqueness of the baby boomers. Maybe they were not the Greatest Generation, but they were the ones who glorified the whole idea of generational identity. For decades, Gen X-ers have had to hear complaints about our political apathy, our popular culture, and our musical tastes.

We have suffered many of these critiques without complaint. Why? Because so many of us worked for so many of them. They were the bosses of the business world. And they were supposed to be retiring very soon, but the recession has changed all that.

In 2008, U.S. workers aged 55 to 64 who had 401(k)’s for at least 20 years saw their retirement balances drop an average of 20 percent. A recent YouGov poll showed two-thirds of this generation have not made the necessary adjustments in their financial planning. This is not a recipe for leaving the workforce anytime soon.

What does this mean for the rest of us? Younger workers who expected promotions when the boomers cleared out are going to have to stew in their own juices. With this job market, looking for a better opportunity elsewhere is not in the cards.

Leaving aside the Boomer bashing, this seems to be a contradiction. Are Boomers retiring early or not? I suspect that some of what’s happening is class based. The managerial and Creative Class 60-somethings are continuing to work because they can and often want to – their skills are relevant, they’re not caught in large layoffs and if they need to they can consult. On the other hand, working class, non college-educated boomers who are laid off aren’t finding jobs – their health care costs are high and they’re expensive to hire. So many of them who can’t find work may be taking Social Security at 62 in spite of the disadvantages (smaller checks, limits on earned income).

Does anyone have statistics on who’s retiring and who’s keeping working?

7 Responses to “How Can I Miss You If You Won’t Go Away?”

  1. Matt Kures Says:

    Michael,

    For one perspective, take a look at some recent research by the Pew Research Center (America’s Changing Workforce: Recession Turns a Graying Office Grayer). Specifically, look at Part II of the report “Attitudes towards Work.” http://pewsocialtrends.org/assets/pdf/americas-changing-workforce.pdf

    Cheers

  2. Buzzcut Says:

    While early retirements may be a short term problem for the system, long term they actually help the system. Benefits are cut for early retirees, and they are likely to live much longer than they and the Socialist Insecurity Administration expected them to. Over time, the savings to the system from the reduced benefits will be huge.

    Think about it this way: you take a 50% benefits cut when you take SS at 62 vs. 70. So by age 78, a person retiring at 70 has made up all the money he missed by not taking early retirement, and everything after that is a “bonus”.

    Life expectancy at age 65 is in the 80’s for whites and Asians. Asian females are averaging 89! And they’re going up every year.

  3. john Says:

    No one with an IQ higher than bread mold bought the “Boomers Are Working Too Long” angle. I think that meme originated with my whiny Gen-X compatriots who feel that the world owes them a upper-management position. The only reason they can conceive that that hasn’t happened yet is those damn boomers are still around. It couldn’t possibly have anything to do with the fact that they are entitled douchebags.

    Also? Alan Arbauch is an ass. If you’re 62 years old and lose your job, you don’t “opt to retire”. You opt to continue eating and having a roof over your head.

  4. Michael Wells Says:

    Matt — Thanks for the lead, good study. I’d still like to see an early retirement breakdown by class, the way Richard has done for unemployed.

    Buzzcut — The best time to retire is 66 if you want to keep working. “Full retirement age”, currently 66, is when you stop losing money for working.

    For every month you collect SS before “Full retirement age”, you lose 1/2%. So at 62, you lose 25% of your monthly check. Maybe this isn’t bad if you don’t have/want to work, because the four years of payments more than make up for the lost 25%. BUT if you work and earn income before full retirement age, you lose $1 for every $2 you earn over roughly $14,000. So for example, if your SS check would be $2,000 and you earn $60,000 year, you collect nothing but still lose the 1/2% per month.

    At 66, full retirement age, the earnings cap disappears and you can earn as much as you can without losing benefits. You’ve also passed the 1/2% per month penalty.

    For most people, waiting until 70 vs 66 doesn’t make sense. You gain about 30% by waiting, but you’ve foregone four years of free income. So instead of $2,000 month you get $2,600 month. But you’ve given up $96,000 in those four years ($2,000 x 48 months). So 96,000 divided by 600 is 160 months, or 13.3 years. You break even at 83 years.

    Given that most of us are more active at 66 than 83 (heck, more of us are alive), it doesn’t make sense to me to wait for 70. Not to mention that while statistically life expectancy is in the 80’s, lots of individuals die or become disabled between 66 and 70.

  5. Michael Wells Says:

    “The best time to retire is 66 if you want to keep working.”

    I meant “The best time to start collecting is 66 if you want to keep working.” Technically if you’re still working you’re not retired — although the lines are getting blurry.

  6. Buzzcut Says:

    People should look at SS as “longevity insurance”, not as a stream of income for having fun and drinking margaritas in retirement. If life expectancy at, say, age 62 is now 85 (as it is for whites), while some people may die before then, lots of people will live beyond that age, some will live far beyond it.

    Better to use your savings and pension for the early years, and allow those SS benefits to accumulate. Yes, you’re “wasting” the “free money” should you be one of the unlucky people to die before the life expectancy age. But that’s really of no consequence to you compared to being destitute at age 96, or whatever.

    The pace of technological change being what it is, and the fact that people are a lot healthier now than they were in the past (much less smoking, for example) implies that life expectancies are going to increase rapidly in the future. Combine that with retirement in a warm climate (which in and of itself increases longevity), and I would be planning to be retired for a long time if I were you. Take it at 70, not 66.

  7. Michael Wells Says:

    Buzzcut,

    I guess you are a real fiscal conservative. I’d see it differently, but your position makes sense.

    I remembered this morning that there’s an obscure provision in Social Security that lets you “un-apply” and start building benefit levels again if you pay back everything you’ve received. I don’t know how many of those taking early retirement at 62 know about this, but it amounts to a loan from the government to people over 62 — which along with unemployment benefits could get someone through a patch of joblessness, after which they could “un-apply”, repay their benefits and start building towards reapplying at 66 or 70 or whatever.