To supplement meager unemployment checks, a number of older workers who exhaust their savings are cashing in their 401k or other retirement investment plans, and are filing prematurely for social security, despite the consequential penalty of a reduction in future benefits. Although liquidating a pension plan or drawing social security too early enables unemployed citizens to stall a financial crisis, they lose in the long run by forfeiting hundreds of thousands of dollars; because the money received, less the penalty, is not adjustable to the original amount calculated for the recipient at full retirement age. What you see when you file that application is what you will get thereafter, excluding any cost-of-living increases that may be applicable in the future. When the unemployment checks stop coming to the near-retirement-age boomers, many out of desperatation opt for the reduced social security benefits over no income at all. Undoubtedly, some would say without hesitation, “Damn the penalty. Show me the money!”
It doesn’t take a rocket scientist to figure out what discerning boomers know — that some will die before receiving social security benefits. Subsequently, their demise leaves a little more change in an already bleeding kitty, and those who survive long enough to draw the funds can still look forward to a shaky future.
According to recent media reports, in 2011, for the third year in a row, 58 million Americans who are currently receiving monthly social security benefits will again be denied a cost-of-living increase. Furthermore, reports by various retirement research groups predict that social security funds will run out around 2037.
