COVID-19 Just Foisted this New Threat On Social Security Benefits
From Birch Gold Group
Thanks to the pandemic, Americans on the verge of retiring could be forced to deal with some adverse effects.
NBC Connecticut provided some insight on the developing situation:
Your Social Security payments have been determined in part by a formula that includes your earnings at age 60, two years before you’re eligible. Connecticut Congressman John Larson said for people turning 60 this year, when many workers’ wages are down, that could be catastrophic.
According to Larsen: “What it could mean is a person born in 1960 would lose $2,000 a year for the rest of their lives.”
Of course, being a politician, the only remedy available to Larsen is to propose new legislation on top of the legislation that already exists.
In this case, Larson’s proposal comes in the form of a “bill that proposes to change the Social Security payment formula so workers don’t get impacted by what everyone hopes is a one-year temporary dip in wages.”
Notice the word “hopes” in the previous quote. That should raise questions if this proposal is to be taken seriously.
What if the “dip in wages” lasts longer than one year?
Aside from the obvious questions, the Social Security Administration itself seems to question the potential effectiveness of the proposed legislation:
Given the unprecedented level of uncertainty for the future course of the COVID-19 pandemic and its effects on our society, economy, and individual and governmental responses, we must understand that the actual experience for the balance of this year and beyond is very likely to differ substantially from the path illustrated in this scenario.
If the proposed legislation doesn’t address the situation at hand, or can’t, then it seems like it could do more harm than good. Of course, that shouldn’t surprise anyone.
And this isn’t the only way COVID-19 could potentially impact Social Security benefits in the longer term.
3 More Potential Coronavirus Impacts on Social Security
The main way Social Security is funded is through collection of payroll taxes on earned income. Right now, 12.4% of income ends up in the government’s coffers.
An article on Kenosha News points to the possibility that slowing wage growth may hinder future revenue collection for the SSA:
If wage growth slows, so will the ability of Social Security to collect additional payroll tax revenue in subsequent years.
The Cost of Living Adjustment (COLA) may also be impacted, depending on how inflation rises or falls for the remainder of 2020. According to the Motley Fool, “it’s time to kiss your COLA goodbye,” thanks to a dip in inflation for May.
But of course, how that scenario turns out remains to be seen.
Finally, in order for Social Security to thrive in the coming years, the workforce must remain stable. Thanks to record unemployment and other economic impacts, the birth rate may stay low during the pandemic. According to the same Kenosha News article:
The issue for Social Security is that a certain birth rate level is needed to ensure that the stability of the worker-to-beneficiary ratio. If birth rates remain persistently low, there won’t be enough new workers to replace retirees in, say, 20 years.
Overall, things don’t look good for Social Security over the next couple of decades. Hopefully that changes, but it’s a good idea to prepare for the worst.
Don’t Rely Solely on Social Security
Any meaningful proposal from Congress to help with Social Security seems doomed from the start. It looks like more “passing the buck” instead of actually solving the underlying problem. Thanks to the COVID-19 pandemic and government shutdowns, that could get a lot worse.
Granted, a collapse of Social Security won’t happen overnight, but it sure looks like that’s where it’s headed.
A good idea to consider is not relying solely on Social Security benefit payments. Consider taking control of your retirement savings, including the possibility of diversifying with precious metals like gold and silver.
You may not be able to rely on the government when you retire, but at least you’ll have a plan that can help you feel more secure.2020, coronavirus, retirement, retirement savings, social security, us economy