2/2/2012 1:09 PM ET|
Jobless at 62: Are you out of luck?
If you had planned to work until you were older, but a layoff threw a wrench into your plans, 3 questions can help you decide whether to take Social Security early.
The unemployed who turn age 62 are caught between a rock and a hard place: Jobs are scarce, but if they take their Social Security now to supplement their unemployment it will permanently reduce the benefit. The rules changed in 2010 for retirees who take their Social Security but then find a job or their circumstances change. In the past, they were allowed to pay it all back and then collect the higher benefit for life. No longer. The Social Security Administration now offers a window of one year to pay back Social Security benefits or their benefit amount is set (which of course means reduced ) for life. On the other hand, if they don't take the early Social Security and ultimately don't find a job, they may deplete other assets that they desperately need to fund their retirement. By delaying, early Social Security recipients can lose out on thousands of dollars.
My friend Harry Bristow, from Northern California, faced this problem. He was in the construction industry, specializing in large-equipment sales and management. When the real-estate crisis hit and new-construction projects dried up, he knew he was in trouble. No one was going to build when, as Harry said, "The $10 million buildings are now worth $5 million. Who is going to build new?" He was laid off right before his 62nd birthday, putting him smack dab in the middle of a 12% unemployment rate in the Sacramento area. The major employer in the region is the state of California, and it was furloughing existing employees to make ends meet. Like many other prospective employers, the state was not focused on hiring new employees. And even if it was, it certainly was not opening any jobs that fit Harry's skill set.
Unfortunately, my friend Harry was not able to find any type of sales or management position. His experience had been large-equipment sales in construction and farming, and he was also a former company president -- difficult skills for him to transfer in this environment. A headhunter looked for him within an hour-commute radius and found nothing. To make matters worse, Harry was not ready to retire. He had planned to work an additional five years, but he decided right away to supplement his 99 weeks of unemployment with his Social Security payments until he found a job, and he is very glad he did. He didn't find one, and he is still looking.
The conventional wisdom to delay retirement -- work until you are 70 and then collect Social Security -- just doesn't apply here. Surely, you've heard it: "For every year you delay Social Security, the benefit increases by 7% to 8%." So the question often is, "Where else can you get 8% these days?" Taken cumulatively, the increase equals at least a 25% increase in benefit by waiting four years. This sounds great at first glance, but the problem is that while you may be willing and able to work, you may not have a job. The recession and subsequent economic slowdown brought with it a tight job market. Though the unemployment rate as of December 2011 for those age 55 and over is 6.2%, that figure may be artificially low because many pre-retirees may have given up looking for jobs.
No one can predict if and when the job market will open up, but if you are looking for a job, there are some factors to consider on whether to take Social Security early. Ask yourself these questions:
How good is the job outlook in your field and in your area?
Not everyone can move to the booming state of North Dakota or has the skills to work as a heavy-equipment operator or registered nurse -- not to mention the ability to handle cold weather. Check your state's projected job growth as well as the unemployment rate to get a realistic idea of whether you'll be able to find something in your field. If you are trained in an industry that is on the bottom of the list, consider taking Social Security benefits early while you continue to look for a job in your industry or retrain for a crossover career.
However, retraining is a stretch in many situations. An employer is going to want the time, effort and cost put into training a new employee to pay off, so the tendency may be to hire a younger worker over an older one. Unless the older worker has skills that far surpass those of the younger applicant, an employer may favor the younger applicant. An older worker might actually end up staying longer and being more loyal than a younger one, but perception is reality, especially when job hunting.
Will you have to deplete assets to meet monthly expenses?
If you aren't making ends meet with unemployment and are depleting assets, taking Social Security now is the right option. For every month you don't take Social Security, you fall further behind. Based on an $80,000 salary today, a 62-year-old would receive a monthly Social Security benefit of approximately $1,400. Six months of payments would be $8,400, and a year's payments would be $16,800. If that retiree doesn't take Social Security benefits for the full four years and waits to hit the full Social Security age of 66, he will miss out on just over $67,000 in income, which would take 14 years to make up by earning an "extra" $400 per month. Sometimes a bird in the hand is worth two in the bush.
Does longevity run in your family?
If you don't need the income now and have longevity in the family, waiting may be better. My mother-in-law recently passed away at age 97; she is survived by a 99-year-old sister. My husband's family obviously has longevity. My family does not, though. Both my mother and my maternal grandmother passed away at age 71, so the genes are stacked against me. If I am faced with the choice of whether to take payments early, I would easily choose the "bird in the hand" option, whereas my husband would probably choose to take benefits later. Consider your family history and your own health when making your decision.
In 2008, when the financial crisis hit and the stock market dropped almost 40%, it hit just about everyone in this country hard. Our financial helpline was buzzing with calls from people who no longer got the overtime they'd regularly had for the past five years or had their house payments increased drastically. Executives had their pay cut 15% to 25%, and workers were being furloughed. We noticed a growing commitment to making budgets work and getting out of debt across all income levels. Imagine being on the cusp of turning 60 at that time. My friends who have hit 60 this decade tell me it is a tough birthday anyway, but seeing jobs dry up and wealth built up over a lifetime suddenly disappear added salt to the wound. That certainly couldn't have been easy, and the tough decisions needed today in the aftermath are just as hard.
More from Forbes:
VIDEO ON MSN MONEY
I am 57, and the company I worked for for years went bankrupt in 2010. Despite having two college degrees and years of productive work experience, I have only been able to find temporary jobs with no benefits; one for six months, one for two months, and one for three months. I believe my age is a factor in my employment difficulties, as well as the fact that employers are hoarding cash and don't want the expense of hiring full-time employees with benefits.
As far as Social Security goes, my full retirement age is 67, but I will start drawing it the first chance I get at 62. Put it off, and it may not be there when I turn 67.
Also, the $80K salary the article mentions is something rarely achieved by the majority of American workers. In most fields, if you get up to $40K or $50K, you did pretty well, and many people will never earn more than $20-30K. Let's get real about what most people are making.
After a 30 year career in sales, I was laid off in 2007 at age 60, found another job 6 months later which lasted only 6 months. So, in 2008 I continued looking for work, depleting assets for two years and was forced to take early social security at age 63. We lost our home with over $270K equity after our bank would not consider unemployment benefit income in our loan modification request.. Even though I have consistently continued to seek any type of work since 2009, (sales, office, administration, customer service) if I do ever find a job, I am limited to earning only about $13,000 annually before it triggers a reduction in my social security benefit. There will be no gold in our "golden years" as we have suffered terribly and are barely living above the poverty level. We did everything one is supposed to: save, live within your means, have no debt and we still got caught in the perfect storm. Little did I ever dream my retirement would consist of fear, anxiety, depression, and a sense of hopelessness; very hard for a person who has always been practical and in charge of their own affairs. We feel victimized many times over.
This country needs some creative new solutions to solve the social dilemma that hundreds of thousands of victims like us are facing, like subsidized house sharing, or part ownership housing, or work/housing arrangements, as housing is the biggest expense in retirement unless you were lucky enough to save your house. I think most people like us will rely on family but we don't have any, so there has to be some additional alternative solutions as more and more people continue to hit the 55-60 age discrimination job barrier and can no longer hold on. God help us all!
I'm 54 with three degrees, taught for six years, and have been unemployed for over a year.
I'm collecting unemployment which will run out soon. I've also applied for disability but the fact remains, I have applied to three jobs every single week for over a year. I've had one interview. No job offers. And I'm sure it's because of my age.
I look at my resume and I feel so proud of what I've accomplished, sure that someone will see my worth. But that didn't happen.
So I started thinking of what I could do to earn money. I am a writer so I self-published on Amazon.com. I also design so I opened up a shop on cafepress.com. I'm working on a curriculum book, and other creative projects. I have no idea what will come of any of it, but it makes me happy, and what else do I really have. Just me, the talents I was born with, and lots of time.
I'd encourage all of us to think creatively. What do we love to do, what are we really good at, what could be a great business.
I know all of this looks bleak, and I haven't lost money in the stock market like some of you, mainly because I never had much. I raised my four kids alone. Money was something we used as soon as it came in. We never had a chance to save a dime.
So my heart goes out to all of you who've lost a job, lost money, a home.
I don't know if it would do any good to write congressmen, the President, etc. Or call the news? Someone has to care what is happening to us.
I wish all of you the very best in your search for work. Keep an open mind. Maybe we can create our own opportunities. We sure seem to be smart enough, educated enough.
Just my thoughts.
Time to leave the states and move to Panama or Costa Rica. Live well on $1200/mo. without the high price tag here in the USA!
I love my country, but my country doesn't love me anymore...
I can say this for sure employers don't like my age of 51 either. I really believe it starts at 49 to 50 years old and gets worse the older you get.
I don't think looking at a age in employment should even be a factor. The way I see it is older job applicants know what it means to work, have experience, and some well learned life experiences, which I call wisdom.
The other fact I'd like to point out is older employees will stay until we retire, whereas the younger ones will leave when a better offer shows up. Maybe this is the way the employer keeps costs down by employees not staying until retirement? I often wonder about that....
This article couldn't have been published at a 'better' time- I say that tongue-in-cheek :( . I am the 27 year old daughter of a 60-something year old father whose pay was slashed 75% earlier this week due to a company 'restructuring'. His benefits, luckily, have been retained (for now) , but what's disheartening is that he's been dealing with this even before the Great Recession hit- between 2003 and 2005, he was laid off 3 consecutive times from small companies in the Rust Belt city we used to lived in- all of the layoffs had to do with downsizing, restructuring, etc. After a year of unemploymemt, my folks relocated to a city in the southwest when he landed his current position, and I joined them here shortly after finishing college up north. We have been thankful to be in a state largely unaffected by the recession, and now this happens. He is looking for a higher paying job, but we all know that might be a fruitless venture, so he may make the decision to retire and take Social Security. Side note- my mother has not worked since their relocation, so they do not have additional income- and I am not thrilled with my mother about this (she doesn't have a severe disability that precludes her from working at even a quiet desk job etc). My siblings and I feel AWFUL, but we are all in decent positions to help them out financially-this is a direct result of the college educations they worked so hard to provide for us. My parents are stubborn and will initially refuse help, but we plan to be adamnant that we will help them. I realize that this is a reverse situation from the stories we hear of baby boomer-age parents helping their adult children in the recession, but it's my family's situation.
This is a time when families need to band together and be self-sacrificing- young folks, I know that many of us are not exactly where we planned to be, as we've taken our own hits with the economy, but please remember these situations affect those in their 50s and 60s much greater. Their chances of re-bounding after a job loss or paycut are much, much more slim- we need to help out those who've loved, raised, and provided for us to the best of our abilities.
So what else is new ?? I was an IT professional and was "laid off" shortly before my 61st birthday. I managed to tread water between part-time jobs, unemployment and my savings. I was lucky, since I had no major debts other than my mortgage and utilities. When I turned 62 I had no choice. I took my Social Security, sold my house and relocated. Since that time I have seen my 401K destroyed by Wall Street, the house I sold foreclosed, and sadly I see no improvement in the future. (As I used to say when I was a Marine grunt in Da Nang . The Light at the end of the tunnel is the headlight of an f'n train coming...")
Got the ax when a large insurance company changed their marketing strategy. No longer an active multi-licensed insurance agent - out of a job & with few choices at age 55, I took the early company retirement and lifetime health plan. Collected unemployment for a year while looking for a new job. Found a way to accelerate mortgage payments & paid off balance. Reduced other debts, stopped charging on plastic, and changed buying habits. Got rid of high interest plastic & closed many store accounts. Expanded the garden to 100 ft x 40 ft - canned & froze excess to cut grocery bill. Got rid of second car. Lowered my sights, found a job in retail with incentives, worked 9 more years and then retired the second time. Earned a second retirement pension & created a great 401k - did a safe roll-over. Looked at receiving SS every 6 months until the increase was not worth it.
Started SS at 64 1/2 and never looked back. Expect to be debt free by 12/2012. Wife is still working 5 more years.
Oh, yeah, had lung cancar along the way and beat that too !
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.