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Job loss at 55 is bad news

By Jennie L. Phipps · Bankrate.com
Wednesday, May 16, 2012
Posted: 2 pm ET

If you are laid off at 55, your retirement planning has probably been replaced by crisis planning. The Government Accounting Office released a report this morning pointing out that the seasonally unadjusted unemployment rate for older workers increased from 3.1 percent in December 2007 to a high of 7.6 percent in February 2010, before decreasing to 6 percent in April.

While this rate is low compared to other segments of the population, the impact can be severe for a couple of reasons. By 2011, one-third of all unemployed people older than 55 had been out of work for more than a year -- much longer than other segments of the population. When older workers do find another job, on average, they earn 15 percent less than they did previously. Younger people either match or improve their wages when they are rehired.

Time out of work and a lower salary after being rehired has a serious impact on savings. For a former employee with a 401(k) retirement plan, joblessness -- even if the worker doesn't dip into the plan -- can mean fewer years to save and a lower overall contribution. In the case of workers with a traditional pension, losing a job can prevent them from vesting.

The GAO also pointed out that joblessness pushes people into claiming Social Security at 62, which not only lowers their benefit, but also can reduce the benefit overall because, had the person stayed on the job, their benefit would have reflected higher earnings.

The author of the report, economist Charles Jeszeck, who is GAO's director of education, workforce, and income security, says one of the things driving up the government unemployment rate for older workers is the number of people who left the workforce when the economy soured who are now hunting for jobs as things appear to improve.

Availability of health care is a big factor, Jeszeck says. People who are not eligible for Medicare and who have exhausted their right to buy health care through the Consolidated Omnibus Budget Reconciliation Act, or COBRA, are eager to find positions that provide coverage. That may be a pipe dream. Jeszeck's report offers anecdotal evidence that employers are very reluctant to fill that need because it drives up their insurance costs.

Jeszeck concludes that there is an enormous need to create more jobs, but as a federal employee, he doesn't endorse any of the plans on the table. He is critical of the situation. "To some extent, this is the result of the gridlock in Washington," he says. "There are so many things that need to be done, but most of them won't happen until the gridlock is addressed."

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41 Comments
Hap
July 11, 2012 at 5:46 pm

I know how one feels. I lost my job at 48 years old. That was 22 years ago. Job fairs with double page ads for my skill set. I never got an interview. I had a history of good job performance with satisfied customers and would go years with perfect attendance. I also worked a lot of overtime. (On call 24 hours) How did I survive? When I received raises, I immediately started saving 50% of the new increase. When I paid off a car I financed, the money still went to the credit union, but savings, until I was laid off. I had one new car in my life. We raised 4 children and two of them have mba's. (They paid it themselves and can be very proud of themselves.) I did a lot of side business's but was never very good at that. Probably because I never invested much money, but I did not waste my money on failed ventures either. I saved $75,000 of insurance costs (health) by self insuring and paid any bills out of pocket. (Yes I could have paid for surgeries out of pocket, but we made sure we took care of ourselves.) And yes one can live on social security if they keep their finances under control and don't get jealous of their friends going on trips. Good luck to all because I have been there and am happy to be keeping on!

dan
July 10, 2012 at 11:50 pm

hey ck, it's not that easy. You seem somewhat ignorant. It's a known fact that businesses don't want to hire older workers. If something drastic happens to you after fifty, it's not going to get any easier, that's for sure.

Lewis Munn
July 10, 2012 at 9:38 pm

I have lots of training in many areas. When I was fired by a firm president who thought even if I stayed up all night repairing his equipment, I should come directly to the office and put in a full day too.

I never got a job again! Of course, he is a multi-millionaire! And it acts like I have a black marks somewhere, perhaps out of revenge when he was caught lying to the government about my work and the conditions of my firing.

It is hard to subsist on just SS, especially as food prices rise.
Government policies are driving food, and transportation, costs up and up; and SS does not increase much if any!

I suspect there are a goodly number of us who are farmed out and forgotten. We will never appear in any statistics. And as prices skyrocket, we eat less and less well. And can afford less and less medical help. Obama rationed care does not help, and the new tax on those who cannot afford Obamacare is just another nail in the coffin.

We vote, but that is forgotten apparently!

Plaint over.

Anna Jones
July 10, 2012 at 7:55 am

This was a nasty insensitive article. The author needes to suck it up to wht a mean spirited person she is.

WhiteLotus
July 09, 2012 at 9:53 am

Faster than.... Hate auto-complete/auto-correct. Sorry.

WhiteLotus
July 09, 2012 at 9:52 am

Lower the Medicare age to 55 and many of these older workers could retire with what they have already saved, thus opening up jobs. Medical insurance is driving us all bankrupt and medical insurers drive up the cost of care even paster Han their premiums.
Medicare at 55 would be a serious step towards solving many problems.

boehner
July 09, 2012 at 6:16 am

Gridlock in Washington? Thank the effin party of no.

Fred Freeder
July 08, 2012 at 9:40 am

CK people like you are the reason why honest people are out of work. They keep people like you that are suck ups and spend more time on their knees than working.

ck
July 07, 2012 at 9:36 pm

There is lots of work for those who are willing and able to work. If they want a perfect situation they can keep complaining but if they want to work they can start monday. Get over yourself.

Tigerpaw
June 26, 2012 at 8:30 pm

The best way to stay viable in an economy like this is to prepare for hardship long before it becomes necessary.

I have a younger neighbor who keeps regular tee times and just bought a new SUV last year. Yet, he seemed in shock when he found himself looking for work last year with a family and a mortgage to support.

After enjoying a luxury for 5 years, I got rid of it a couple of years ago and took a cast off vehicle from a family member, started riding the commuter/express bus to downtown and started working two days a week from home. I've saved thousands in the past 2+ years, just from cutting back, before I actually needed to. Meanwhile, with my time away from the golf course (it'll still be there when I'm ready), I've learned a skill that's already generating customers and income, plus, the skills will help me handle my savings when I retire in another year or two. By that time, another car will be waiting, along with better engine technology.
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Why do people make negative political correlations to their personal hardships ONLY when their preferred political party is not in charge?

Hmmmmm....

It's called immaturity and ignorance. Both are like untreated illnesses. So, go ahead, spread your germs everywhere you go. You'll feel better, but, everyone else will only feel worse because of you. Unless you're a lobbyist, none of these guys are going to impact you by more than a few hundred dollars either way this year, or the next year, or the one after that. So, get over yourself.