Laurie MacNaughton ©2020
If you are a baby boomer turning 60 in 2020, here’s something you need to know: without a legislative fix, your lifetime Social Security benefits are very likely to be permanently reduced, even if you wait to retire until full retirement age.
Reduced. Permanently. Permanently reduced.
The reason for this is due to the formula the Social Security Administration uses to calculate benefits. The Social Security Administration, according to its website, takes a “snapshot of average wages of every worker in the country and factors it into your benefit calculation.” This means benefits are based upon average wages across all sectors of the economy. Due to COVID-19, wages are projected to be down nearly 6%, as measured by the Average Wage Index (AWI). And, because each subsequent year’s benefits are based upon the recipient’s first year’s benefits, this cohort can anticipate reduced benefits for the rest of their lives.
The news gets even worse for wage-earners with significantly higher-than-average incomes as, dollarwise, they stand to lose much more.
Then there is the knock-on effect. For survivors claiming a deceased spouse’s benefits, their monthly benefits will also be permanently reduced, as will those claiming Social Security Disability Income.
So, how did this problem arise?
Social Security was updated in 1977, and at that time no provision was made for dealing with a crisis that wrought devastation upon nearly all sectors of the economy – like, say, might occur with a global pandemic. There was ample warning indicating protections needed to be added when the dark economic times of 2008-2009 served as a shot over the bow. However, because the AWI fell only briefly and relatively insignificantly, no legislative action was taken to correct the glitch that came to light.
There is a proposal afoot to fix the problem. On August 4, Congressman John Larson (D-CT), Chairman of the Social Security Subcommittee, published an op/ed in which he calls upon “Republicans in Congress [to] join with House Democrats and correct this anomaly with the Social Security COVID Correction and Equity Act.” Chairman Larson’s proposed act would patch this hole and prevent a reduction that would have lifelong effects on a cohort already suffering financially on the doorstep of their retirement years.
Boomers have always been known for getting things done. But it’s hard to accomplish a task if there is no awareness the job needs doing.
Contact your congressperson, and let him/her know the time to fix this is now.
If you do not know who your congressperson is, you can find that information at https://www.house.gov/htbin/findrep. Your future benefits – or the benefits of one you love – are riding on this. And the clock is ticking.