From late 2007 to early 2010, the number of unemployed older Americans (age 55 and over) has spiked by over 60%, causing many to give up their job search after months of frustration and simply declare themselves retired. Exacerbating this trend is the fact that these older Americans have to spend on average eight more weeks job-hunting than their younger counterparts (36 weeks instead of 28), and older Americans are often the first laid off, due to their typically higher pay grades and not-necessarily-higher productivity.

If that weren’t enough, older working Americans typically have higher real estate or rental agreement costs than young workers, and often still occupy the same large suburban homes where they raised their children. Then there’s the fact that they are the most likely group to have to support a dependent parent or spouse, and are far more likely than young workers to develop their own career-hindering health problems. So, not only are their incomes under downward pressure, but their personal costs are often under upward pressure, and this squeeze has profound consequences for Americans both young and old.

Unemployed older Americans who are unhappily accepting early retirement typically start drawing on their Social Security benefits early, which affects both their income and the rest of the economy. The later retirees wait to draw Social Security, the higher their monthly income checks will be, generally in the range of an additional 6-7% for each year between ages 62-70 that they wait.

When an older American plans on working for an extra five years but is laid off, and they start drawing on Social Security (if they’re even old enough to do that), they’re hit with three simultaneous problems: First, their investments and retirement accounts are not yet ready, second, their Social Security income will be substantially lower than it would have been had they waited, and third, they haven’t had to time slash their expenses before their income suddenly drops to only $ 700-$ 1300/month, which is often not enough for them to pay their mortgage or rental agreement.

Which means, of course, that many of these sudden and reluctant retirees are ending up in foreclosure or evicted from their rental agreement, which of course adds to the high foreclosure rate and struggling real estate market.

It also means that these reluctant retirees are paying drastically less income tax, while simultaneously draining money from the Social Security Administration, a double hit for the Federal government, which is already facing a record budget deficit. Finally, it means that Social Security’s “bankruptcy date” will be a lot sooner than forecast; all of these effects are causing serious damage to the rest of the workforce and the economy generally. Anyone who thinks Generation Y will have access to the same quality of Social Security benefits is going to be either be dead or very disappointed when it comes time for them to collect.

What can you do to prepare for the possibility of unemployment and unwanted retirement? First and foremost, recognize that it CAN happen to you, so start setting up your contingency plan now. To do that, the two most important things you can do are to slash down your expenses and maximize your retirement investments. For older Americans in particular, making the transition towards a low fixed-income lifestyle is extremely difficult, but critical so that when and if your career ends suddenly, you’re not hemorrhaging money each month, but are already living frugally and inexpensively.

The most effective place to start is with your real estate: start the search for a small, manageable, inexpensive home for your retirement, preferably on a single story, and with easy access to services and amenities. When you find a comfortable, affordable rental agreement or home for sale, you’ll already have made a huge dent in your monthly expenses.

For younger Americans, contributing more towards your retirement investment accounts than you think necessary is absolutely critical, since you may not have Social Security to help out, and you may not be able to work as long as you desire. Living frugally is important for freeing up your income for investments, but of course your budget need not be slashed like people preparing for retirement. Make sure your mortgage or rental agreement is easily affordable even if your income suddenly dropped, and with the proper planning, you can expect to retire early by choice.

Brian Gregory is a real estate investor and writer who contributes to dozens of online ezines, and manages EZ Landlord Forms, an online real estate resource that provides state-specific rental agreement forms and hundreds of other landlord forms for investors.

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