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Effects of the Pandemic on Retirement and Social Security Trends

The COVID-19 pandemic has brought about economic and other disruptions over the past couple of years that will be studied for many years to come. Some of these disruptions have affected big-picture trends when it comes to when Americans are retiring and when they’re choosing to file for Social Security benefits.

Retiring Earlier, Filing Later

Americans can file for Social Security retirement benefits as early as age 62 or as late as age 70. A growing number of retirement-age Americans are now waiting longer to begin receiving Social Security benefits.

According to an analysis performed by the Washington Post, the number of workers applying for Social Security benefits during the past 12 months fell by 5% from the same time period last year. This was the biggest drop in the annual number of new Social Security applicants in nearly two decades.

At the same time, retirements over the past year among Americans between the ages of 65 and 69 increased by 5%. The nation’s retiree population has grown by about 3 million during the pandemic, which is nearly double the number of new retirees that would have been normal before the pandemic. 

In other words, more people are retiring but fewer are claiming Social Security benefits. This is one of several unusual workplace trends that have emerged over the past couple of years. Another is the record number of Americans who are quitting their jobs, which some are calling the “Great Resignation.” 

Factors Behind the Trends

It’s clear that many people who are in their 60s and, under normal circumstances would have continued working, have decided to retire instead. Among the factors experts cite to explain this are the generous stimulus checks sent out by the federal government, temporary expanded unemployment insurance, strong stock market gains, soaring home values and ongoing concerns among many about returning to work while COVID-19 is still with us.

Some of these people adjusted their lifestyles during the pandemic by not going out to eat or for entertainment as much, not commuting to work, not buying work clothes or lunches out every day, etc. This enabled them to cut their expenses and save more money, which they were able to sock away in their retirement accounts.

Once lockdowns began to lift, many of them decided they could maintain their lower-cost lifestyles. When combined with the additional savings and market gains in their retirement accounts, they were able to retire without applying for Social Security yet.

Waiting to Claim = Higher Monthly Benefit

Waiting to claim Social Security benefits can result in significantly higher monthly checks. If you wait until after you reach full retirement (which is 66 or 67, depending on when you were born), your monthly benefit check will be approximately 8 percent higher than if you claim benefits before full retirement. This is a permanent increase — you’ll receive the higher benefit amount every month until you die.

On the flip side, if you claim Social Security when you turn 62 (or any time before you reach full retirement age), your monthly benefit will be approximately 8 percent smaller than if you wait until you reach full retirement age. 

According to calculations from the Social Security Administration, an individual turning 65 this year who earned $60,000 in the most recent year would receive $132 more in monthly benefits by waiting just one year to claim benefits. If this individual lives until age 85, he would receive nearly $32,000 more in Social Security benefits by waiting this one year to file.

Each Situation is Unique

Many different factors go into each person’s and couple’s decisions about when to retire and when to claim Social Security benefits. Give us a call if you’d like to discuss your situation in more detail.

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