New Social Security applications surged in 2009. Some 3.2 million Americans age 62 and older began collecting their due last year, up about 20 percent from 2008 and the most new awards paid out since Social Security payouts began in 1940, according to a new Urban Institute analysis of Social Security Administration data.
Getting older. Much of the increase was due to the oldest baby boomers reaching Social Security’s eligibility age. The number of Americans turning 62 increased 9 percent between 2008 and 2009.
Laid off. Some seniors may also have been motivated to sign up for retirement benefits when they couldn’t find work after a layoff. Just over a quarter (26 percent) of men and 37 percent of women eligible to collect retirement benefits in 2009 did so, up from 21 percent and 33 percent respectively in 2007. “I think it is pretty clear that the uptick in Social Security claiming is because people simply need those benefits to make ends meet,” says Richard Johnson, coauthor of the study. “People do tend to take up Social Security when the unemployment rate becomes high.”
Smaller checks. Retirees who sign up for Social Security at age 62 receive lower monthly payments for a longer time, while those who delay retirement have higher monthly payments condensed into fewer years. “Social Security is a terrific safety net for unemployed seniors, although early take-up usually means lower retirement benefits for the rest of one’s life. That’s the downside,” Johnson says. For those currently age 62, Social Security monthly payments are reduced by 25 percent for beneficiaries who begin collecting at 62 instead of waiting until age 66, the year they are eligible for their full retirement payout. So, a baby boomer eligible to receive $1,000 each month based on his work history at age 66, would receive checks for just $750 monthly if he claims at age 62.