Unemployment haunts Social Security recipients
By Tami Luhby @Luhby May 7, 2013: 6:06 AM ET

5
Email Print

Diana Brest is getting smaller Social Security payments because she was unemployed before retiring.
NEW YORK (CNNMoney)
Losing your job is a nasty shock at any age, but for older Americans nearing retirement, there’s an extra kick: A late stretch of unemployment will haunt them throughout their Golden Years in the form of lower Social Security payments.
“Those years are vital to their Social Security benefits,” said Gary Koenig, director of economic security for AARP’s Public Policy Institute. “It’s something you’ll have to deal with your entire life.”

Social Security benefits are based on a person’s highest 35 years of earnings, which are then indexed for wage growth. The last years of one’s career are when most people earn their highest salaries, so replacing those top-income years with less lucrative ones — or no income at all — can prove costly. A person who misses a year of earnings could see his Social Security payments reduced by 3%, or just over $450 annually if he receives the average check of $1,262 a month, according to a calculation AARP ran for CNNMoney.
For Diane Brest, four years of unemployment at the end of her career meant a $68 reduction in her monthly Social Security check.
“That’s $68 I could use towards food or medical expenses,” said Brest, 62, who lives in Phoenix. “Food has gone up in price. Minimum payments on credit cards have gone up. Health insurance has gone up. It’s very depressing.”
Brest got hit with a double whammy that’s common for those laid off late in life: To get by by, she had to start collecting Social Security several years earlier than she planned. Before being let go from the insurance company where she worked for 14 years, Brest had intended to work until age 66, when she would have been eligible to receive $1,200 a month. Instead, she chose to start collecting at 62 because she needed the money. She thought she would get $968, but because of her unemployment, she’s only getting $900 a month.
You can estimate your own future Social Security payment with a calculator on the Social Security Administration’s website.