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COVID-19 Social Security Disaster Looms For Anyone Born In 1960

Congress can easily fix it, but right now it could change retirees' Social Security benefits by thousands.
COVID-19 Social Security Disaster Looms For Anyone Born In 1960
Image from: Wikimedia Commons

If Congress doesn't act to fix it, around 4 million workers in the United States will have a very bad long-lasting coronavirus effect: their eventual Social Security payments will be cut by as much as $2,000 a year in retirement, because they were unfortunate enough to turn 60 this year, 2020. It could be a much larger group if the nation doesn't have a quick economic recovery and the people who turn 60 next year fall into a "notch," as well as the families of all these people as their beneficiaries. This is happening because of how Social Security determines benefit payments for new retirees. Social Security uses a formula to calculate benefits based on the wage index of a given year. For people who turned 60 this year, this is their year and its wages have been crap.

Nancy Altman, president of Social Security Works, explains how this happened. "Social Security’s earned benefits are based on each worker’s individual earnings history appropriately adjusted to reflect the growth in aggregate economy-wide wages." That means That wage index, as they call it, is determined every year for all the people who would be eligible for retirement in two years' time. "This structure is ingenious and fair, has numerous advantages, and works extremely well in almost all economic times," Altman writes. "But these are not normal times." This year, the aggregate wage is going to be drastically lower because of the pandemic, and without action, millions will suffer.

The action part is easy. Rep. John Larson, a Connecticut Democrat, has legislation to fix it, a bill that has been hanging around since July. It's an elegant fix that wouldn't just make sure the benefit cuts don't happen this time around, but makes sure it can't happen again. It simply ensures that the Average Wage Index never drops below the previous year's level. That protects retirees from all major economic downturns.

With the year winding down legislatively, Larson is pushing to have his fix included in the year-end spending bill, along with an increase in benefits for Social Security recipients. "Some say we can’t afford to protect and expand Social Security now, during a global pandemic," he writes in an op-ed in The Hill. "However, those most harmed by the pandemic—the elderly, people of color, and especially women of color—are the same ones who rely on Social Security the most, and they desperately need a temporary emergency benefit increase."

That's in anticipation of next year, when he promises to introduce a revised version of the Security 2100 Act to expand Social Security and ensure its solvency for at least the next 75 years. That's a fight for next year. Right now, it's critical that Congress makes sure all the people unfortunate enough to have been born in 1960 aren't arbitrarily punished a second time, and for the whole of their retirements, by the pandemic.

Published with permission of Daily Kos

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