Workers who approach retirement in a down labor market (like today’s) can take a big hit in their government-guaranteed retirement funds, according to a new paper by Courtney C. Coile and Phillip B. Levine.
A higher unemployment rate around the time of retirement reduces Social Security income for those in the bottom two-thirds of the income distribution; we estimate that an unemployed worker experiences a roughly 20 percent drop in Social Security income, consistent with claiming benefits several years early. Overall, our results indicate the importance of the challenges faced by lower-income workers who face a weak labor market as they approach retirement.
For the top third of earners, a down stock market when they retire leaves them with “modest reduction in investment income a decade or so later.”
