More Than 1 Million Baby Boomers Are Secretly Unemployed

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early retirementThe Bureau of Labor Statistics released its tabulation of the monthly unemployment rate, showing the jobless rate dipped to 7.5 percent in April. But that leaves out one major segment of the population: Those forced into retirement. While older Americans were less likely to lose their jobs in the recession, it's well known that they were far less likely to find a new one if they did, in part, because of age discrimination. So some gave up and tapped their Social Security benefits -- becoming retirees.

Early Retirees Were Kicked Out Of The Workforce
How many Americans are forced into retirement because they couldn't find work? At the request of AOL Jobs, Matthew Rutledge, an economist at the Center for Retirement Research at Boston College, attempted to estimate the size of this group that remains invisible to the BLS. What he found: At the height of the recession, as many as 53,000 extra Americans were retiring early each month. In total, the recession has driven around 1.4 million additional Americans to collect Social Security early.

Why So Many?
No agency collects data on early or forced retirement. But Social Security does release how many people have started to claim benefits each month. Rutledge, a research economist, estimated how many people one would expect to be claiming benefits if there hadn't been a recession, and then looked at the difference between the prediction and the reality. And that difference is stark.

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Between June 2008 and June 2010, an average of 39,100 extra people claimed benefits each month than past trends predicted. In the 12-month period ending in November 2010, the average peaked at 53,192 monthly additional claims. (See the chart below.)

Financial Crisis Causes A Big Jump
The official unemployment rate in November 2010 was 9.8 percent. But in the previous two years, more than 1.05 million extra Americans had claimed Social Security. If these people were added to the unemployment rolls, the jobless rate that month would actually have been 10.4 percent -- higher than at any point since 1983. It's an especially stunning number, given that the trend for almost 20 years has been for people to retire later in life.

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But then, in 2011, the number of claims began to go down. In fact, in the 12-month period ending May 2012, an average of 4,000 fewer people claimed Social Security than expected each month. That isn't because America's older workers suddenly found lucrative employment, but because so many had claimed their benefits already.

"You're someone who's turning 64 in 2012, and you've looked at how long you've worked, and decided that's when you want to claim," explained Rutledge. "And the recession happens, and you lose your job, or your stock portfolio goes in the tank, or your family really needs your help, your adult child moves back. So you decide you want to claim earlier."

A Sudden Slump
A person is eligible for full retirement benefits at 66 (if born between 1943 and 1954 -- the retirement age is older the younger you are). But a person can claim as early as 62, if they're willing to take a cut. By 2012, it seems that a lot of those 62-to-65-year-olds had already put themselves on the Social Security rolls, leading to a slump in the numbers. As Rutledge put it: "The elephant has been passed through the snake."

But the snake has left behind a stinking pile. In the summer of 2012, the number of claims once again rose above expectations, and has stayed elevated ever since. This may be because long-term unemployment remains so high. If a person turns 62 and has been without work for a year and a half, Social Security is probably a tempting proposition.

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But still, there have been just 133,000 excess Social Security claims in the past two years, a far cry from the wrenching figures of winter 2010. If these are people who would otherwise be unemployed, it would hardly nudge the jobless rate at all. But it still adds up. Between March 2008 and March 2013, 1.4 million more Americans have opted for Social Security than expected.

A bad gamble for a healthy lady
Social Security claims are by no means a perfect way to judge who's retiring early because they can't find work. After all, people can start collecting Social Security benefits while still looking for work. Or they may retire and live off other funds before deciding to cash in on Social Security later on.

But multitudes of older Americans clearly did take advantage of Social Security before the official retirement age. And for many, that will come at a cost. Those who start collecting at age 62 see a 25 percent reduction in benefits. If you were to die at 70, that's a pretty good deal, since you had an extra four years. But if you live into old age, that becomes a sizable cut.

"If you're a healthy woman, you're going to end up costing yourself a lot of money," explains Rutledge. "If you're a man in poor health, it might actually make sense."

If you were laid off in the recession, even better. Research suggests that may have cut your life expectancy by as much as three years.




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