December 6, 2022

COVID’s Impact on Claiming Social Security

The economy expanded smartly in the years before the Great Recession, just as it did before the COVID downturn. But the two recessions were markedly different, with opposite effects on when older workers signed up for Social Security, a new study finds.

In 2008, the stock market slid nearly 40 percent. Older Americans with retirement accounts, wanting to recoup their losses, were more likely to keep working or looking for a new job during the protracted downturn. But skyrocketing unemployment pushed many older workers in the other direction.

Social Security became an obvious fallback in the Great Recession for jobless workers who were at least 62 years old as the unemployment rate stagnated at around 10 percent for 1½ years. Not surprisingly, then, more people overall started claiming the retirement benefit early.

The COVID recession had the opposite effect on Social Security claiming. There was a slight decline in the likelihood that older workers started their benefits early – defined as prior to Social Security’s full retirement age – according to the Center for Retirement Research.

COVID played out differently mainly because the generosity of the federal pandemic assistance was unprecedented. First, in March 2020, Congress approved $600 weekly payments to supplement the standard unemployment benefit and extended them for 13 weeks. In December 2020, Congress renewed the weekly supplement at $300 and extended the benefits for 11 weeks. In March 2021, they were extended again through the end of September.

During COVID, the slight drop in claiming Social Security early was driven by older workers whose earnings are in the bottom two-thirds of all workers’ earnings. The unemployment support from the federal government made it easier for them to stay afloat without having to sign up for the retirement benefit.

The stock market also behaved much differently in the pandemic than in the 2008 financial crisis. During COVID, the market snapped back within months of its steep drop. The Standard & Poor’s 500 index rose 18 percent in 2020 and soared another 28 percent in 2021. House prices also surged.

People with assets responded to their newfound wealth, becoming more likely to sign up for their Social Security benefits early relative to those without assets, the researchers found.

Still, this impact was more than offset by the decline in early claiming overall because more older Americans were using their generous unemployment benefits to keep paying the bills. …Learn More

July 16, 2020

Examining the Black-White Wealth Gap

The Black Lives Matter protesters have brought renewed attention to the enduring economic inequality that separates Black and white America.

Homeownership is at the heart of this disparity.

For many Americans, their largest source of wealth is the value they have built up in their homes over time. The house is also traditionally the primary way for moderate- and middle-income parents to pass wealth on to their children.

But less than half of African-Americans own homes, and the ones who do have a fraction of the equity whites have due in large part to the nation’s long history of segregated housing, economists say.

Further, the tidal wave of foreclosures a decade ago reduced the already low homeownership in minority communities, which felt the brunt of the housing market collapse. The Black homeownership rate is just 42 percent – 5 percentage points lower than it was in 2000. White homeownership remained stable throughout the crisis and is now around 72 percent, the Urban Institute said.

The upshot of this combination of fewer Black owners and less equity for those who own a house is that the typical African-American worker has $4,400 in home equity, compared with $67,800 for whites. The home equity gap accounts for about half of the Black-white disparity in total wealth.

A web of systemic reasons explain the home equity gap. Black homebuyers have more debt, in part because they are twice as likely to receive a mortgage with a high interest rate as white buyers with comparable incomes. …Learn More