Staying Fit
Roughly 4 million people born in 1960 could see a big drop in their Social Security retirement or disability benefits if Congress doesn't act to fix this year's glitch in how benefits are calculated. Like seemingly everything else in 2020, the pandemic is largely to blame.
The problem lies in how your Social Security benefits are calculated. The amount of your benefit is tied to the average of your top 35 years of earnings. Before that calculation, however, Social Security adjusts your earnings for historical changes in wages, using an index called the average wage index (AWI). The adjustment helps correct for the changes to wage growth over your working life: For example, a $20,000 salary in 1975 has the buying power of nearly $50,000 today.
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The Social Security Administration (SSA) adjusts an individual's lifetime earnings two years prior to first eligibility. For retirement benefits, first eligibility is age 62. For boomers turning 60 this year, then, the 2020 AWI — which won't be calculated until late next year — is extremely important in adjusting lifetime wages.
The problem: Thanks to the economic slowdown caused by the coronavirus, the AWI could be down about 9 percent in 2020 from what the SSA projected in 2019, according to estimates by the SSA. The AWI has only fallen once, during the Great Recession in 2009, and then by only 1.5 percent. A 2020 AWI based on dramatically lower average wages would result in lower initial Social Security retirement or disability benefits for those who become eligible for benefits in 2022, as well as for their spouses or dependents. And since your future benefits hinge on the amount of your initial benefit, a lower AWI would affect the benefits for those born in 1960 for life.
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Do your part by telling Congress to fix this unfair Social Security COVID cut. Go to action.aarp.org/socialsecurity to send a message to your senator and representative.
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