How Covid-19 affected the program

0

Tara Moore | Getty Images

When the onset of the Covid-19 pandemic sent shockwaves through the U.S. economy, it also raised concerns about how the ensuing slowdown could affect Social Security.

The program’s trust funds are already dwindling. At the same time, the Social Security Administration faced the unprecedented task of moving its in-person services primarily to mail only.

Now, as a result of these initial shocks, some fears of disproportionate blows on trust funds or program benefits have proven to be unfounded.

Meanwhile, the government agency’s services and the cost of living adjustment for next year may be about to change.

Here’s what we now know about how the pandemic affected Social Security.

Social Security trust funds still weak

zimmytws | iStock | Getty Images

Social Security trust funds were already low when Covid-19 hit.

In April 2020, the Social Security Administration declared in its annual projections that the estimated exhaustion dates have remained the same. The old age and survivors’ insurance trust fund, which pays retirement benefits, is expected to run out in 2034, when 76% of the promised benefits would be payable. When combined with the Disability Insurance Fund, both sets of reserves are expected to run out in 2035, with 79% of promised benefits payable at that time.

But these estimates did not take Covid-19 into account. The economic downturn has fueled some fears that these exhaustion dates could be accelerated.

The main thing is that we do not think that the picture has changed much.

Shair Akabas

director of economic policy at the Bipartisan Policy Institute

The economic downturn could have caused the depletion date of the pension fund to be between 2029 to 2033, based on estimates from the Bipartisan Policy Center, carried out last year. Estimates from the Congressional Budget Office from the start of the year indicate that the trust fund could be depleted by 2032, the invalidity fund expiring in 2035.

The Social Security Administration Trustees’ Annual Report for this year has yet to be released with post-Covid-19 estimates.

But because the economy is growing, including the middle and upper income salaries who make up most of the trust fund income, the impact of the pandemic could be small, according to Shai Akabas, director of economic policy at Bipartisan. Policy Institute.

“At the end of the day, we don’t think the situation has changed much,” Akabas said. “It’s still the disastrous image we had a year, two or three years ago.”

People born in 1960 can benefit from reduced benefits

The dramatic effect the pandemic has had on the economy and jobs in 2020 has raised concerns that the average wage index will drop dramatically.

This, in turn, could reduce Social Security benefits for people whose benefits are calculated based on that year, especially retirement benefits for people born in 1960.

The average wage index rose every year from 1951 to 2008, then fell 1.5% in 2009, due to the Great Recession, chief social security actuary Stephen Goss said last year. . In 2020, a “much larger drop” was possible, he said.

If the average wage index fell 5.9% from 2019, that would reduce the monthly retirement benefit of a median employee born in 1960 by about $ 119 per month, he said at the time.

More from Personal Finance:
Retirement and Return to Work: How Your Income May Conflict With Other Finances
Who would benefit from the proposed changes to the 401 (k) catch-up contributions
Inflation problems worry many retirees about running out of money

But the good news is that as 2020 progressed, the average wage index doesn’t appear to have fallen as much as people had expected.

The Congressional Budget Office estimated in January that it may have fallen only 0.5%. The official index of average salaries for 2020 will not be confirmed until later this year.

The recovery indicates a much smaller drop in benefits for the affected cohort.

If this is true, these beneficiaries will not see such a large reduction in benefits, Akabas said.

Moreover, it is unlikely that there will be any imminent action by Congress on the matter, although a floor should probably be put in place to prevent these kinds of results from occurring in the future, he said. he declares.

Social security offices still have a backlog of mail

VALERIE MACON | AFP | Getty Images

In March 2020, the Social Security Administration suspended in-person services at its field and courtroom offices due to the pandemic.

Today, meet in person are available on a limited basis. However, to get a time slot, your needs must be critical, such as if your problem is interfering with your ability to access food, shelter, or medical attention.

Other transactions – such as benefit claims and card replacement requests – were instead executed by mail.

But like the IRS, which has a backlog of millions of unprocessed paper tax returns, the Social Security Administration is also behind on its mail.

A recent investigation by the Inspector General’s Social Security Office found that the administration had “inadequate internal controls over mail processing.”

This was after the Office of the Inspector General visited 73 sites, including field offices, program service centers and social security card centers and found a widespread backlog of unprocessed applications and procedures. ineffective treatment.

The Inspector General’s Office is working with the Social Security Administration to resolve these issues, with a final report expected before the end of this year.

Next year’s COLA could be much higher

Elders

MoMo Productions | Digital vision | Getty Images

The annual adjustment of the social security cost of living is calculated each year on the basis of the Consumer Price Index for urban and office workers, or CPI-W.

Benefits rose 1.3% in 2021, giving about 70 million Americans a boost to their Social Security or Supplementary Security Income benefits.

For 2022, this adjustment promises to be much larger for one reason: rising inflation.

Rising prices for everything from food to gasoline has helped push the latest estimate for next year at 6.1%, according to The Senior Citizens League, a non-partisan senior group.

If the annual increase reaches this level, it would be the largest increase since 1983.

However, there are still three months of data left before the Social Security Administration announces the official rate change for next year.


Source link

Leave A Reply

Your email address will not be published.