And now, as the US economy begins to repair itself, there are signs that these benefits may be diminishing less, if at all.
Average wages in the United States fell sharply in 2020, as the economy nearly came to a halt amid a nationwide shutdown.
These numbers – known as the Average Salary Index, or AWI – are used to calculate Social Security benefits. Data for 2020 is for people born in 1960, who would first be eligible to claim their monthly checks at age 62 in 2022. Your total monthly benefit is a formula based on the total number of years worked , your salary during this period, AWI and other criteria, such as the age at which you are claiming.
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Others who become disabled in 2022 or die that year, thereby triggering benefits for their survivors, would also receive benefits based on the 2020 salary.
The total number of so-called people affected could be 5 million, according to estimates by Representative John Larson, D-Conn., Who has introduced legislation that addresses the issue.
Last year, Social Security Administration chief actuary Stephen Goss said in testimony to Congress that the AWI could be 5.9% lower than it was in 2019. This in turn could reduce the median income monthly retirement benefits for a person born in 1960 by about $ 119 per month.
However, recent data from the Congressional Budget Office indicates a much less dramatic drop. In a January letter, the federal agency estimated that AWI fell only 0.5% between calendar year 2019 and 2020.
The actual numbers won’t be known until later this year, the CBO said. Social Security is expected to release salary data for the fourth quarter of 2020 in April.
“While it’s not as bad as we think it is, and it might be negligible in terms of the decrease, that doesn’t mean a big drop like this won’t happen in the future,” he said. said Dan Adcock, director. government relations and politics at the National Committee for the Preservation of Social Security and Medicare
“It might be better to tackle it now rather than wait for it to happen in the future,” he said.
Historically, the AWI first declined in 2009, following the financial crisis, Goss said in testimony last year. The 1.5% drop did not prompt any action at the time, although the AWI increased every year from 1951 to 2008.
This time, however, because early estimates showed a larger possible drop, congressional leaders drafted bills to address the issue.
This proposal could be updated pending further information from the Chief Social Security Actuary.
Meanwhile, the senses. Tim Caine, D-Va., And Bill Cassidy, R-La., Introduced a bill that would prevent AWI from going negative.
Social Security advocates were hoping that AWI’s decline would spur Congress to act this year and might even include larger corrections to the program.
However, broader changes may be less likely now, given President Joe Biden’s current agenda focused on infrastructure and tax reform.
Still, others are hoping Congress will make the fix before any potential change in benefits affects those recipients from next year.
“I don’t think AWI should go negative,” said Charlie Douglas, president of HH Legacy Investments Inc. in Atlanta.
“Why should there be a negative adjustment in a year for people who are 60, when there is no negative adjustment for anyone else receiving Social Security?” Douglas said.
Nancy Altman, president of Social Security Works, an advocacy organization that wants to see the overall agenda expanded, said the notch was a “force-to-action” event that would have pushed Congress to act if the drop was as steep as originally planned.
“It still makes sense for them to act before the end of 2021,” Altman said. “This is both the right policy and the right policy, so I hope they will. ”