Weak Job Market Leading To More Early Retirements

(Dow Jones) Linda Conti isn't ready to hang up her business attire just yet at age 64. But the unemployed trade association executive isn't sure she has much choice in the matter.

"I feel like I've been forced into retirement," says the former director of membership for a construction industry group in Southern California. "And I'm not ready to retire."

Ms. Conti is among a growing legion of unemployed older workers who say the recession is leading them on a path toward early retirement -- whether they like it or not. Many are relying on financial resources, like Social Security payments, previously reserved for later in life, putting their future well-being into question.

Even though the U.S. labor market is showing signs of improvement, with a slowing number of job losses and a drop in the unemployment rate to 10% in November, conditions for older workers continue to deteriorate.

The number of unemployed workers ages 55 to 64 has nearly tripled since the recession began, to about 1.6 million of the nation's 15.4 million unemployed as of November, according to the Labor Department. By comparison, the number of jobless workers of all ages has roughly doubled.

The share of people age 55 to 64 who are employed -- which has been trending down for the past 18 months -- sank to 59.9% in November, an eight-year low for that month and down from 60.3% in October. The rest either want jobs and can't find them or aren't able or interested in working.

The drop in employment for older workers follows a period of nearly three decades in which a greater share of individuals approaching retirement age had jobs. At the peak of the boom, employment among those age 55 to 64 topped out at nearly 63%. At the time, workers were seeking to keep up with the rising cost of living, while employers were more willing to hire older workers in a tight labor market.

While it is difficult to quantify just how many Americans are retiring earlier now amid weak job prospects, recent work from two Wellesley College economists, Courtney Coile and Phillip B. Levine, suggests the effect is large. In a new working paper, they estimate 378,000 workers will be pushed into retirement as a result of the weak labor market -- almost 50% more than will end up working longer because of stock-market losses.

Some unemployed workers nearing retirement age are dipping into their savings accounts to make ends meet. But savings for most people have taken a hit in the economic downturn. Others are taking advantage of Social Security, the government-sponsored pension program people can tap as early as age 62. But for most people to get full benefits, they have to be at least 65 years old, depending on their date of birth. By law, that age will rise to 67 by 2022. And drawing on Social Security is equally fraught, since the earlier retired workers begin to withdraw their benefits, the lower their monthly payments will be -- for life.

The policy is meant to encourage people to keep working and fund the Social Security system. Already, higher penalties are being imposed on those who start withdrawing their benefits early.

That is why Joan Campagna planned to wait until age 70 to retire.

"I'm worried," said Ms. Campagna, who lives in Fort Myers, Fla., and was 64 years old in April when she lost her job as an executive assistant at a small public-relations firm. In June, she began withdrawing her Social Security benefits, six years earlier than intended. As a result, she is receiving $1,417 per month, about $600 less than if she waited until age 70. "I want to be sure that I can support myself," she says of her unplanned early retirement. "That's my biggest concern."

The U.S. Social Security Administration, which was established in the wake of the Great Depression under President Franklin D. Roosevelt, saw a 21% surge in applications for retired worker benefits for the fiscal year ended Sept. 30. Only about 15 percentage points of that was expected from a surge in baby boomers and working women reaching retirement age, according to Stephen Goss, the agency's chief actuary.

Ms. Coile and Mr. Levine's research indicates that many of those who retire for lack of work are less educated, earned lower incomes and were less likely to have investments or other sources of income, meaning they are more reliant on Social Security payments during their retirement, and more adversely affected when those payments are reduced.

The end result, said Ms. Coile, is that "it leaves workers forced into retirement by a late-career layoff with lower income and a higher risk of poverty."

That effect is already being felt by food pantries, homeless shelters and people like Guy Kelley, director of the Merrimack Valley Community Service Corps based in Lawrence, Mass., who said he has a waiting list of 15 to 20 applicants for the 50 or so slots in his "foster grandparent" program, which pays a meager hourly stipend of $2.65.

"There are people clamoring for these positions," Mr. Kelley said. "That basically means people either can't find work or have given up and are desperate for anything right now."

Among 55- to 64-year-olds, unemployment was 7% in November, up from 6.6% in October, despite a decline in overall unemployment. That is more than double the rate when the recession began, and the highest seen in November since the Labor Department's records began in 1948.

And these unemployed jobseekers say it is even more difficult for them to find work because of what they see as age bias.

"Employers think that I can barely check my email," says Bob Bellin, a 55-year-old unemployed executive in Cleveland who describes himself as tech-savvy. The former chief executive of a billboard-advertising company has been job hunting since early 2008. "My fear is that by the time the economy improves, I'll be a guy who's 58 and out of a job for three years, and...that guy probably doesn't have much of a shot."

An economic recovery is unlikely to quickly restore the jobs lost by older workers -- and some might never return. In Goshen, Ind., part of a metropolitan area that has seen one of the sharpest jumps in unemployment in the nation, Jack Cook, 65, was laid off in September from his job as a sales manager for a manufacturer of rubber gaskets.

He hasn't had any luck finding another position, and began withdrawing his Social Security benefits in November, amounting to about $1,800 a month. He is hoping it will be a temporary fix, but job prospects, particularly in his industry, where he has spent the past 27 years, look bleak. "There used to be eight or nine rubber companies in the area," he says.

Ms. Conti, who lost her job in June, says she is hoping to find work and avoid tapping her Social Security benefits for the next few years, but she already is digging into personal savings to help pay her rent of $1,200 a month. Her current unemployment benefits run out next June. Without a job, she says, her situation feels precarious.

"Right now I'm healthy, but you never know what tomorrow is going to bring."