How Losing Your Job Now Can Cost You Social Security Money Later

A layoff might hurt now, but it can also take a bite out of your retirement income later. How a midcareer job loss can cost you $40,000.

A layoff might be a kick in the butt now, but it could also take a bite out of your Social Security benefits later.

Think of it as the takeaway that keeps on taking, whether you were just starting your career or, even more markedly, if you’re 10 to 15 years from your planned retirement.

Each situation differs, but the Social Security Administration’s online calculators indicate a midcareer job separation could cost you $40,000 over 25 years of retirement. And if you have a spouse relying on your earnings to collect benefits equaling half of yours, that could inflate the loss to $60,000.

“Higher lifetime earnings result in higher benefits,” the administration says. “If there were some years when you did not work or had low earnings, your benefit amount may be lower than if you had worked steadily.”

Jim Steele, 57 and laid off in 2013 from an information technology position in Conway, Arkansas, has been working toward a programming degree. Upon checking his retirement benefit estimate online, he said he was concerned about his projected Social Security benefit falling.

“It’s just one more reason to get back to work as quickly as possible,” Steele said.

He’s not alone.

About 4.6 million workers a month left their jobs in 2014, the Bureau of Labor Statistics estimates. That’s about the population of Philadelphia and Chicago combined. A little over half of those workers quit; about one in three were let go involuntarily through layoffs and other discharges. More than one in three unemployed workers stayed out of the workforce 27 weeks or longer, BLS says.

Late-career job loss: The double whammy

The Social Security Administration bases your retirement benefit on your top 35 years of earnings after they’re indexed and averaged monthly.

Lop off a few years of earnings, and that monthly average can drop significantly, leading to a lower “primary insurance amount,” the benefit you’d get at “normal retirement age,” which is 66 for most people retiring now, 67 for those born in 1960 and later. You will collect less than the monthly primary amount if you retire early, as young 62; you get more if you delay, up to age 70.


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