Social Security Applications Haven’t Risen During the Pandemic Despite an Uptick in Retirement. What Gives? | The Motley Fool

The Great Resignation been in the news a lot, but the reality is that a large share of those dropping out of the workforce in the wake of the pandemic are older Americans who were on the cusp of retirement before the health crisis began. In fact, early retirement numbers have grown during the pandemic — but Social Security applications haven’t. And that’s a surprising thing.

Why aren’t more people claiming Social Security?

Although a large share of baby boomers say they’ve retired since the start of the pandemic, applications for Social Security benefits have been fairly flat, according to the Boston College Center for Retirement Research. Now one reason behind that trend could be that tech-phobic seniors may have opted to delay their claims due to not being able to file in person. The Social Security Administration closed its field offices in 2020 when the outbreak first erupted.

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But a bigger reason why benefit claims remained flat could be financial concerns in the wake of the pandemic. Although the stock market had a strong couple of years, many investors may have gotten spooked by the brief bear market that ensued in the spring of 2020. As such, they may have intentionally held off on claiming Social Security to avoid a reduction in benefits.

Seniors are entitled to their full monthly Social Security benefit based on their earnings history at full retirement age (FRA), which kicks in at 66, 67, or somewhere in between. Those who retired before reaching FRA may have intentionally waited to file for benefits so as to not reduce a substantial income stream for life.

But also, a big reason why some older Americans may have held off on claiming Social Security could be that they’re not planning to make their retirement permanent. In the wake of the pandemic, many companies have adopted more flexible work policies. That could pave the way for older workers to explore partial retirement — an option that could make it possible to delay Social Security and grow their nest eggs rather than tap them.

A positive trend

Workers who save diligently and amass large amounts of savings for retirement aren’t guaranteed that their money will last. On the other hand, delaying Social Security guarantees a higher monthly benefit for life. And so the fact that older Americans didn’t rush to sign up for Social Security during the pandemic means more people may be setting themselves up for long-term financial stability.

To be clear, Social Security isn’t a reliable enough retirement income source on its own. Benefits could be slashed down the line once the program’s trust funds are depleted, and many seniors can’t maintain the same standard of living they’re used to on Social Security alone without a backup income stream.

But even so, snagging a higher monthly benefit is a smart move on seniors’ part. And so the fact that Social Security claims didn’t jump during the pandemic is a sign that today’s retirees may not be in such bad shape, financially speaking.

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