Bloomberg had an article that caught my eye this morning. Apparently applications to begin receiving Social Security benefits are up. This is undoubtedly bad news for the Social Security system -- as soon as 2016 benefit payments will begin to exceed the fund's revenues. More people collecting benefits earlier could bring this inevitable result even sooner. The recession appears to be driving this increase in applications. Older Americans who are eligible for Social Security are deciding to retire early or collect some extra money.
Applications for Social Security benefits rose almost 50 percent more than expected this year because of the recession, according to the federal retirement program.
"We are seeing a significant increase in both retirement and disability applications as a result of the recession," said Mark Lassiter, a Social Security spokesman.
Given this morning's grim report, indicating that unemployment is creeping ever closer to 10%, that probably isn't surprising. It's a great time to exit the job market if you can collect Social Security instead. General budgetary woes likely also have older Americans realizing an extra check now wouldn't hurt, even if they still have a job.
It's hard to tell how much impact the recession will have on Social Security in the long run. Certainly one year of increased applications won't matter much. But if some predictions about prolonged unemployment are right, then the number of unexpected applications will likely remain high. That could cause the payments to begin exceeding fund contributions sooner than 2016.
This recession has another little mentioned consequence for Social Security. More unemployed Americans mean fewer monthly Social Security payroll deductions. So the longer many Americans are not collecting a paycheck, the worse off the Social Security fund will be.
But it isn't all bad news. Older workers who lose their jobs during the recession may decide to retire instead of reentering the work force -- that means fewer applicants for precious job openings. Additionally, those who want to work again, but are eligible for Social Security, might not feel the need to strain their efforts to do so. That would give an advantage to younger workers looking for jobs more diligently. This effect might not be huge, but unemployed Americans staring double-digit unemployment in the face would likely take any help they can get.
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