Will Covid 19 Affect Social Security Benefits? As the number of Covid-19 cases has been mushrooming every single minute in cities all over the world, American people are afraid of the second wave of the Coronavirus pandemic as it may be on the way. There were record-breaking cases of Covid-19 experienced by the nation on July 1 with more than 54k new confirmed cases just in a single day based on the data collected from the Centers for Disease Control & Prevention.
This record has surpassed the number of cases that occurred in April. Whether the second wave of Coronavirus is coming or we already have entered it, we can’t ignore thinking about our retirement plans.
Will Covid-19’s second wave affect Social Security retirement plans? Of course, you may come across a number of ways that could impact your Social Security benefits in the coming days. Let’s discuss them so that we can take some appropriate steps to save our retirement plans:
Will Covid 19 Affect Social Security Benefits?
Claiming early could be needed
If someone loses his/her job in the early 60s, it could be difficult to get another job immediately. We do not know when this pandemic lasts. The chances are, you could stay unemployed for a while. Every person has their own opinion and decision.
Some may want to get retired early instead of looking for another job. In case, if you retire early, claiming Social Security as soon as possible is also needed, which may become an additional source of retirement income.
But if you do it, then your checks will be decreased. Are you interested in getting the full benefit amount you are eligible for? Then, the only way is to wait until your normal retirement age or above and then decide to claim. The full retirement age for most people is somewhere between 66 & 67 years old.
Filing for SS benefits can be done as early as age 62, but you would receive 30% reduced checks if you do the same. Make sure to keep in mind that this reduction is permanent. This is why it is essential for you to think about your options carefully before taking the decision of claiming early.
Average earnings can be decreased due to unemployment
Due to this severe pandemic, almost 10 million American people have become unemployed and as the second wave is heading, it may trigger another round of losses. If an individual loses a job and stays unemployed for a considerable amount of time, then it may directly hit his Social Security benefit amount.
Being a Social Security beneficiary, you know that your SS benefits are calculated according to the 35 greatest earnings of your profession. The SSA uses average-based earnings and then adjusts according to inflation. And in the end, the outcome is the SS benefit amount you will be going to get up on your full retirement age.
As you are in the unemployment condition, if you work fewer than thirty-five years, then you will have zeros that will get added to the average of your earnings. Consequently, it would surely decrease your benefit amount.
Even if you have been employed for at least thirty-five years by the time your job has gone, staying unemployed for a significant period during your top earning years may also influence the average of your earnings.
Social Security benefits can be minimized
The SSA tends to use money that comes from payroll taxes. In addition, they also utilize trust funds to give benefits to recent retirees. But, now, those funds used by the trust are running out of money and it is expected to get depleted by the year 2034.
When this situation takes place, payroll taxes will not be able to cover all future benefits, it will cover only around 76% of SS benefits in the future. It means that the SS beneficiaries may suffer from reduced benefits by up to 25%.
At the same time, the Covid-19 crisis has also worsened the situation to a great extent because lots of employees have become jobless. It states that they are not paying payroll taxes because they are not capable of. In case, if the second wave occurs, then it may make the situation more dangerous and worst for people who have already invested in Social Security.
As there is less money coming from payroll taxes, the trust funds can be used forcefully to carry on paying out SS benefits to beneficiaries. It results in the drying of those funds before 2034, which may affect the checks of the beneficiaries that will get reduced sooner.
SS benefits can also be reduced due to payroll tax cuts
It is anticipated to see payroll tax cuts that will be proposed by President Donald Trump as a part of the coming coronavirus stimulus bill. Of course, it may have a direct, negative impact on Social Security’s future. In case, if it happens, it will be going to influence the availability of the money for Social Security Administration negatively.
They may have great difficulty in paying out benefits to SS recipients. This is where the depletion of trust funds may happen at an early rate. Furthermore, once these funds will become low, then the Social Security Administration may tend to rely on payroll taxes completely so that they can give benefits to those who have already spent their payroll taxes on Social Security.
As a result, benefits could already be decreased by around twenty-five percent. However, with the cuts in the payroll taxes, these benefits could be affected to a great extent.
There is no doubt in saying that the Covid-19 pandemic has actually impacted the lives of people everywhere including their businesses, professions, and much more to some degree. And at the same time, Social Security is not an exception. It states that Social Security may not be as trustworthy.
Social Security beneficiaries should not depend on Social Security funds only. It is best recommended to invest in your retirement fund as much as you can if you feel that these benefits are going to be minimized in the coming time.