Paul Skidmore is hesitant to call himself retired. The former insurance claims adjuster in Finksburg, Md., was laid off in February 2008 and has been job hunting for more than a year. Although at 62 Skidmore is old enough to begin drawing Social Security, he doesn't want to permanently leave the workforce. "On the one hand, my brain is telling me go look for a job," says Skidmore, who originally planned to retire at age 66. "On the other hand, why bother? Just retire."
Skidmore is among a growing number of people who want to work into their 60s but are pushed into early retirement by the weak job market. The number of unemployed Americans ages 55 and older expressing interest in finding a job has grown by 60 percent since the end of 2007, according to the Bureau of Labor Statistics. But finding work has proved difficult. The unemployment rate for older job seekers has more than doubled since 2007 to 7.2 percent in December 2009, and the average duration of the job search for older workers was 36 weeks in November—far longer than the 28 weeks most younger workers remain unemployed. Some discouraged seniors eventually give up on finding a new job and start calling themselves retired.
Many workers may want to delay retirement to replenish decimated 401(k) portfolios, but a larger number may be forced to retire early because of their inability to find new jobs, according to research by Wellesley College economists. The researchers estimate that 378,000 workers will be forced into early retirement in the next five years because of the rising unemployment rate, about 50 percent more people than those who will work longer to recoup stock market losses.
Mike Reimringer, 64, of Rochester, N.Y., once planned to retire at age 70, but he's now among the more than 1.3 million workers ages 55 and older who are employed part time because they have no choice. Two days a week, he works as a quality systems associate for a biological research company. "I am certainly hoping to get bumped up to full time, and I am continuing to job-search," says Reimringer, who was laid off from his last full-time job in December 2008. After a year of looking for full-time employment, he signed up for Social Security benefits in December 2009.
Filling the gap. Workers who are at least 62 when they lose their job have the option to sign up for Social Security benefits. The Social Security Administration reported a 21 percent surge in Social Security applications in fiscal year 2009, higher than the 15 percent jump that was expected as the oldest baby boomers reached retirement. The administration's chief actuary, Stephen Goss, attributes the rest of the increase to the weak job market. "This is a gap filler for those people until they can get back to work," he says. "If they don't get back to work, then these benefits will continue for the rest of their lives."
Social Security monthly payments are reduced when they're claimed early. "During the economic downturn, people do start retiring more, and they start doing that at exactly the age at which Social Security becomes available," says Phillip Levine, a Wellesley College economist. "But their Social Security benefits are less than they would have been otherwise." Checks are reduced by 20 to 30 percent for workers who claim benefits at age 62. Those who postpone retirement will see their checks increase by 7 to 8 percent for each year they delay between ages 62 and 70.
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Although Ellie Naill, 64, would have been eligible for $1,800 a month if she had waited until she turned 66 to claim her benefits, she currently receives just $1,500 each month because she signed up in May 2008—three years earlier than planned. "My husband and I are not making ends meet," says the former real estate agent in Cloverdale, Calif., who retired when her commissions stopped covering her expenses. "I either had to sign up for the money that we could get or we would already be out on the street." Naill now works part time in a fabric store for $10 an hour and is looking for full-time work. "I am cashing in part of my IRA to pay our bills for the next few months, hoping a job comes up," she says.
If you reach the average life expectancy, it doesn't matter what age you are when you sign up for Social Security. Retirees who claim their due at 62 receive lower monthly payments for a longer time, while those who delay retirement have higher monthly payments condensed into fewer years. But individuals who live longer than average will come out behind if they claim early. "The risk of taking up Social Security when you are young is you could lock yourself into a lifetime of relatively low retirement benefits," says Richard Johnson, a senior fellow at the Urban Institute. "That's something that could come back to haunt a retiree in their 70s and 80s when their out-of-pocket healthcare costs start going up and they might wish they had an extra $100 or $200 in benefits."
Jim Lord, 63, of Taunton, Mass., calculates that his break-even point is age 77. "If I live past 77, then I should have done it differently," he says. Lord, a former retail design consultant, originally wanted to retire at age 65 but signed up for Social Security in October 2008 after a layoff. "I didn't have any choice," he says about his early retirement. But Lord admits that he enjoys the extra time for golf and going to the gym.
Retirees who find work again can suspend their Social Security benefits or even repay all of the benefits received and restart their benefits at the higher rate. "It's kind of an interest-free loan," says Reimringer, who plans to try to pay back the Social Security benefits he received and then reclaim at a higher rate at age 70 if he finds a full-time job. "If you're strategic about it, you can use your Social Security benefits like unemployment insurance just to get you over the hump," says Wellesley's Levine. But, he cautions, "very few people who start claiming their Social Security benefits stop claiming them."
This safety net for seniors is a valuable source of emergency income that workers shuttled into an unplanned retirement before age 62 don't have. Philip Staros, 57, claimed his pension and unemployment insurance when he was laid off from MTV networks in December 2008. But that wasn't enough to make his mortgage payments, and his Islip, N.Y., home went to foreclosure. Awaiting the notice to vacate, he works part time for MSG networks, earning just 40 percent of his former six-figure salary. "I was forced to retire. I took retirement pay to get out of completely starving," he says. "I originally wanted to retire at age 62, the first chance I could collect Social Security."
No desire to retire. Most current workers (64 percent) say they plan to retire at age 65 or later or never retire, according to a 2009 Employee Benefit Research Institute survey. But retirement is something that can happen while you are making other plans. Almost half of current retirees left the workforce earlier than their desired retirement age, the survey found. "People want to work longer, but a lot of people find out that they just can't," says Johnson. "Either their health gives out or they can't find a job or they lose the job that they have." Some 72 percent of the retirees said they ended up retiring before their 65th birthday. Many of those who retired early said they left the workforce because of a health problem or disability (42 percent), a downsizing or business closure (34 percent), or to care for a spouse or family member (18 percent). Sometimes many of these problems can hit a previously healthy and employed person at the same time.
Deborah Zamudio, 60, retired from her administrative assistant position in June 2009 to care for her husband, who was diagnosed with early-onset dementia. Her unplanned early retirement necessitated major cost-cutting. She downsized from a $1,475 apartment in Milpitas, Calif., to a $540-per-month Utica, N.Y., apartment. "There's no way I could have stayed in California and not worked," she says. "If you have to take early retirement, try to relocate to a less expensive area."
Workers approaching retirement age who are still employed should insulate themselves from job loss as much as possible. "The lower the required skill level and the shorter your tenure is, the more likely it is that you will be the one let go," says Dallas Salisbury, president and chief executive of EBRI. "Keep your training up, and try to build some seniority with an employer." Sometimes, however, a major career change into a more recession-resistant industry is necessary to find work.
After former event planner Jan Albert, 56, of Yorba Linda, Calif., was laid off in August 2007, she took over caregiving responsibilities for her parents. Her mother has Alzheimer's disease, and her father has Parkinson's. She also went back to school to earn a gerontology certification. Albert and her sister then launched an in-home-care business, 24 Hour Angels, which provides elder-care services to 15 clients and employs 20 people. "The baby boomers are going to get old, and there are not enough younger folks to take care of all the elderly," she says. "Anyone who provides services for elders will be in demand."
Less stress. Those who find new jobs after age 50 typically take pay cuts and give up pension and healthcare benefits, but their second careers often involve less stress and more flexible schedules, according to an Urban Institute and AARP Public Policy Institute study of older workers over a 14-year period. When Jerome Schindler, 67, a Columbus, Ohio, attorney who specializes in food labeling, was laid off from Borden in 1995, he set up his own practice out of his home. He eventually attracted six major clients, including his former employer. "The total income I get from this work isn't as much as I was making at Borden, but it is a more relaxed atmosphere," he says. "I come down to my office in the front room in my pajamas, and I work on the computer." Schindler has recently cut back his working hours to part time and plans to retire fully in 2014.
Early retirement isn't necessarily a bad thing for workers with a pension or enough savings to pay their bills. Many early retirees, even if their retirement was unplanned, say they enjoy the extra time for hobbies and grandchildren. But dreams of world travel have been replaced with renting a Planet Earth DVD. And these days, hitting the links means applying for a part-time job at the local golf course.