Social Security Claiming Slows

Baby boomers are waiting to sign up for Social Security.

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Social Security sign-ups spiked in 2009, when a record high of 3.2 million Americans age 62 and older began collecting benefits. But the number of people newly claiming Social Security has since declined to 3.1 million in 2010 and 3 million in 2011, according to a recent Urban Institute analysis of Social Security Administration data.

Part of the 2009 surge in new Social Security applications was due to the oldest baby boomers reaching the age of eligibility for Social Security benefits. Many people also signed up for Social Security in 2009 after they were laid off and couldn’t find a new job during the recession. “Older Americans were more likely to claim Social Security retirement benefits in 2009 than in previous years as the labor market weakened and the unemployment rate for workers age 55 to 64 rose to 6.6 percent, more than double the 2007 rate,” writes Richard Johnson, a senior fellow and director of the program on retirement policy for the Urban Institute, in the report. “High unemployment generally increases the share of adults age 62 and older who claim Social Security because it provides crucial income support for those who can’t find work.”

In 2009, 31 percent of eligible people signed up for Social Security, up from 27 percent in 2007. But the take-up rate has since declined to 28.3 percent in 2010 and 26.9 percent in 2011. The Urban Institute found that a smaller proportion of eligible people signed up for Social Security in 2011 than in any other year since 1976. “After the 2009 spike in retirement benefit claiming when the labor market collapsed, the trend toward delayed claiming that began around 2000 appears to have resumed,” writes Johnson. “This trend reflects changes in Social Security that increase work incentives at older ages, the shift away from traditional employer-sponsored pensions, and better educational attainment among older adults.”

Retirees who claimed Social Security early during the recession may have permanently lowered their benefit. Individuals who sign up for Social Security at age 62 receive 25 percent lower monthly payments than those who wait until age 66, the age most baby boomers become eligible for the full Social Security benefit they have earned. For example, a retiree born in 1950 who would be eligible for $1,000 per month at age 66 would get just $750 per month if he elects to begin receiving payments at age 62. Retirees who delay claiming past age 66 can boost their benefit by an additional 8 percent per year up until age 70.

Those who already claimed Social Security and now wish to boost their monthly payments have a couple of options. If you signed up for Social Security within the past 12 months, you can withdraw your application for retirement benefits, pay back all the money you have received without interest, and then restart Social Security payments at a later date. When you reclaim Social Security your payments will be bigger due to delayed claiming. However, retirees who have been collecting benefits for longer than 12 months are ineligible for this strategy, and each worker can use it only once in his or her lifetime. Retirees are also allowed to temporarily suspend future payments and restart them later, which can result in bigger checks that account for the time period in which payments were not received.

Twitter: @aiming2retire