Early Retirement: Social Security Benefits Didn’t Factor For This Subset of Pandemic Retirees

An African American senior man playing with his dog.
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The pandemic brought financial hardship for millions of Americans while also revealing a subsect of the population that does not rely heavily on Social Security benefits.

See: You Should Check Your Social Security Balance Regularly — Here’s Why
Find: American Workers Get Less Social Security and Less Paid Time Off Than Workers in Other Countries

The Seattle Times reports that many people chose to retire early during the pandemic but surprisingly decided to put off taking Social Security benefits.

The number of workers applying for Social Security benefits in the 12 months ended September fell 5% from the same period a year earlier, according to the Social Security Administration — the biggest drop in almost two decades. During the same period though, the number of workers who retired ages 65-69 actually increased 5%, the Washington Post reports.  While it is unclear how many of those who retired early delayed social security benefits, the sudden drop-off shows an unusual trend for retirees.

During the pandemic, America’s retiree population grew by about 3 million; this is double what would have been expected given pre-pandemic trends, the Seattle Times adds. Concerns surrounding contracting the virus and the lack of childcare likely made it easy for millions of Americans to choose to opt-in to early retirement rather than take on the added risks of continuing to work.

Older Americans seem to have followed the trend during “The Great Resignation,” by which workers of all ages have quit their jobs in droves, creating historically tight labor markets in almost all major sectors.

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The pandemic also created an agreeable financial environment for seniors. Soaring stock markets and a hyper-inflated housing market allowed older Americans to cash in on the bubble. This, plus the added benefit of federal stimulus payments and other insurance programs like unemployment, also increased the incentive to bow out of the labor market altogether.

“Usually in economic downturns, we see increased reliance on Social Security programs, and thought that’s what was going to be coming with the pandemic,” Lauren Hersch Nicholas, an economist at the University of Colorado at Denver who has studied the phenomenon, told the Seattle Times. “The claiming numbers just don’t show that at all.”

Seniors who were asset-heavy were likely able to benefit from a booming market and cash out to retire — which also seems to be what drove the delay in claiming social security benefits. People who retired this year out of caution due to the pandemic and who were not planning on doing so for another five or so years also had the luxury of delaying benefits since they had not planned on receiving them.

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This will pay off big for those seniors. The earliest someone can retire and claim benefits is 62, but with a reduced benefit. Those who retire at full retirement age, which is 66 or 67 depending on your birthday and years worked, receive normal benefit amounts. Those who delay benefits until age 70, the maximum age, will receive a whopping 30% higher check than those who take benefits at age 62.

This means that this year’s retirees who chose to retire but delay benefits have enough financial means to not need federal benefits for support.

“Extended unemployment payments and pandemic relief payments have contributed to lower benefit applications,” the Social Security Administration’s Office of the Chief Actuary said.

These benefits programs have largely now ended, which means this portion of the older population are relying on other sources of income.

More than half of Americans (54.5%) ages 55 to 64 have retirement accounts and three-quarters (74.1%) own their home as of 2019, the most recent date for which Federal Reserve data is available. This suggests that, at the very least for Americans of more means, they are relying less and less on Social Security benefits for their retirement.

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See: How to Boost Your Social Security Benefit With Supplemental Security Income
Find: Social Security Won’t Cover Your Retirement? How To Prepare Now

While 3 million Americans were able to benefit from early retirement this year, for a greater majority Social Security provides the main source of income to most elderly Americans. For about half of seniors, it provides at least 50% of their entire income, and for about 1 in 4 seniors, it provides at least 90 percent of their income, according to the Center on Budget and Policy Priorities. Over 64 million Americans receive Social Security benefits each month.

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 
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