As Congress rushes to pass a second stimulus package to help lessen the economic burden of the last few months, the safety and continuity of Social Security isn’t a sure thing.
As The Center for American Progress points out, three million retired workers who turn 60 in 2020 may end up with significantly less benefits over the course of their retired lives than their predecessors.
In fact, the average earner could lose up to $1,500 in benefits annually unless Congress fixes Social Security’s wage measurement based on the Annual Wage Index (AWI), which is likely to show a steep decline in wages for 2020 due to significant job losses.
How the AWI Factors into Social Security
The Chief Actuary for the Social Security Administration projects a 5.9% drop in the index between 2019 and 2020, which correlates to the average worker born in 1960 losing $1,428 annually in inflation-adjusted dollars for the rest of their life. In short, a significantly lower AWI measure equals a viewpoint that retirees would need less benefit dollars, but, of course, that’s far from the truth.
In specific cases, the drop also extends to survivors of spouses who die in 2022 as their benefit income would be measured based on the reduction in the AWI.
A Potential Solution
The Center for American Progress suggests a solution that has already been introduced: reconfiguring the wage measure so it isn’t reliant on the AWI. In short, the wage measure would be considered more broadly and not take into account a significant drop in incomes like we’ve seen in 2020.
In any case, the problem needs to be fixed before 2022 when workers age 60 turn 62 and are first eligible to receive benefits. Of course, any delay in action would cause significant stress for those in that age range trying to plan for long-term income through their 70s, 80s, and 90s.
At Schott Law, we’re always staying on top of the latest changes and trends in Social Security, especially through these uncertain economic times. If you’re going through a Social Security appeal, denial or other issue and need professional, personable counsel in Eastern Washington or Idaho, call us today at (509) 328-5789.