Social Security in the Time of Covid-19
November 3, 2020
There are several ways in which older Americans will be impacted as a consequence of the Covid epidemic. Anyone who was planning on retiring in 2022 will suffer the most severe repercussions in that they will collect less Social Security over their lifetimes than they would have pre-virus. This is due to the mechanisms which determine Social Security payouts. The social security formula is configured on wages, age and the growth of average wages. Since millions are suffering unemployment and/or reduced hours, overall income is down. For people born in 1960, eligible to retire at 62 in 2022, the loss could be 1428 dollars per year with inflation adjustments (per SSA chief actuary). These workers would benefit by waiting for the year of their maximum benefit or until age 70. The reason that the projection is for those retiring in 2022 is that there is a two-year lag in current employment and the time it is figured into the Social Security formulas. Those who will retire in 2023 are predicted to be unaffected IF the economy rebounds. Predictions are that four million people, workers and also their dependents and spouses, will be impacted.
Older Americans face a deteriorating employment situation. In the past, older workers were protected from layoffs due to tenure and other factors. Today, their higher pay scales and increased vulnerability to the virus has disadvantaged them. The youngest workers (16-24) are still the most vulnerable to unemployment though the 55+ group has jumped to the number two place on the vulnerability scale.
The pandemic will affect social security recipients in other ways. About one fifth of baby boomers have no other retirement beyond Social Security. This year’s COLA (cost of living adjustment) was 1.6%, and it was 1.4% for the past decade. Economists are fearful that the COLA might be zero for 2021 as a consequence of the unemployment and reduced hours of today’s workers. Between 2000 and 2009, the average COLA was 3%. Even with a more generous COLA, many of the elderly suffer due to the increases in living expenses, particularly in healthcare and housing. Medicare premiums, groceries, heating oil and home owner’s insurance are also rising. Out of pocket expenses for prescription medications have increased 252% since 2000 and other expenses have seen similar increases. The average benefit today falls $380 short of maintaining the same buying power as the average benefit in 2000; buying power has fallen about 30%.
The major policy response to the plight of older laid off workers is to allow them to draw 1% of their social security now to help with living expenses. This would amount to a median draw of $4300. A half percent advance would yield about $2500 and would be of great relief to low income households for whom it would comprise a larger proportion of their income. It would not add to the national debt because it would be taken out of the Social Security budget. It is estimated that the loss would be restored if people worked six weeks more than currently planned. Economists point out that 401Ks permit “hardship withdrawals,” though they usually apply to the wealthier American households
Learn More References
This website provides information on how a person can get someone to assist them with obtaining social security benefits.