Joblessness, baby boomers cut deeply into Social Security

February 14, 2010 at 12:00a.m.

McClatchy Newspapers

WASHINGTON — A surge of early retirements and a decline in payroll-tax revenue caused by the recession have begun to cut deeply into Social Security’s surplus funding.

Led by aging baby boomers and older workers frustrated by the tough job market, record numbers of eligible Americans started receiving Social Security retirement benefits in 2009.

According to government figures, more than 2.7 million new beneficiaries were added to the rolls in 2009, up 20 percent from 2008. The one-year increase was the largest since at least 1975.

“Much of that surge is coming from the weak economy,” said Richard Johnson, a senior fellow at the Urban Institute. “The fact that many people can’t find work is forcing them to retire and collect benefits early.”

Annual jobless rates for men and women age 55 and older were higher in 2009 than at any time since the government started collecting the data in 1948, Johnson said.

That forced many to claim retirement benefits at 62, their first year of eligibility, instead of waiting to collect at the full retirement age of 66.

Also fueling the increase was the leading edge of the baby-boom generation, more than 3.4 million boomers who turned 62 in 2009, Johnson said. That was 9 percent more than in 2008 — the first year that any baby boomers, those born between 1946 and 1964, were eligible for Social Security retirement benefits.

Because of the recession, trustees of the Social Security trust fund warned last year that the diminished 2009 surplus would “stay about constant in 2010 because of the economic recession” and “rise only briefly before declining and turning to cash flow deficits beginning in 2016 that grow as the baby-boom generation retires.”

The program’s shaky finances were one reason that Arlie Collins, a retired plumbing contractor from Greensboro, Ga., applied for his benefits three months before he turned 62 in December.

Collins was among 1.3 million men age 62 and older whose retirement benefits began in 2009, according to Urban Institute research.

That was up 20 percent from 2008 and the most new male beneficiaries in any year since Social Security payments began back in 1940, Johnson said.

Collins didn’t mind that Social Security would reduce his monthly payments by about 25 percent, or roughly $250, for starting to collect at 62 instead of 66. After talking with an accountant, Collins determined that he was better off getting less money now than he would be if he waited for larger monthly checks later.