Social Security Claiming: COVID-19 vs. Great Recession

As COVID-19 shut down the economy in early 2020, the press asked repeatedly how the economic turmoil – combined with a health crisis and a plunge in the stock market – would affect older workers. At that time, the natural inclination was to draw similarities to how older workers responded in the Great Recession. Specifically, despite a desire to work longer to replenish lost savings, the lack of available jobs forced many to claim Social Security benefits as soon as they were eligible – at 62. Of course, the COVID experience turned out to be very different than the Great Recession. Although the Dow Jones Industrial Average initially plunged by 34 percent, it soon recovered and continued to increase. The economy also quickly bottomed out, and the National Bureau of Economic Research (NBER) defined it as the shortest recession in history. And unprecedented government support for the unemployed made looking for a job much more attractive than claiming Social Security benefits. While the contours of the two recessions differ sharply, older workers continued to retire and claim Social Security. The question explored in this brief, which is based on a recent study, is the relative impacts of the COVID Recession and the Great Recession on the claiming behavior of different groups.1 Specifically, the analysis, using data from the Health and Retirement Study (HRS), compares how the claiming pattern changed in the recession years 2008-2010 from the expansion years 2004-2006 with how the pattern changed in the recession year 2020 from the expansion years 2016-2018. The discussion proceeds as follows. The first section provides background on the Great Recession and the COVID Recession and summarizes what research to date reveals about the basic contours of the two recessions. The second section describes the data for the current analysis and the methodology. The third section summarizes the results of the two recessions on the claiming behavior of different groups. The final section concludes with three findings. The COVID Recession did not increase the relative likelihoods of early claiming among those in poor health. This result is surprising, but consistent with the findings for the Great Recession. The other two findings were in stark contrast to what happened during the Great Recession. First, during the COVID Recession, the booming stock market increased the relative likelihood of early claiming among those with retirement assets, whereas during the Great Recession workers remained in the labor market to replenish depleted balances. Second, generous unemployment insurance (UI) benefits reduced early claiming among workers in the lowest two earnings terciles, whereas little change was evident during the Great Recession. In terms of the overall impact, the competing effects of the COVID Recession resulted in a slight decline in early claiming as a result of the COVID Recession, whereas the percentage claiming early rose notably during the Great Recession.