It looks like the economy is beginning to bounce back after last year’s downturn due to the COVID-19 pandemic. While that’s good news for all of us, there’s one group of people who are breathing a collective sigh of relief – those who are getting ready to collect Social Security.
Average wages plummeted last year due to the pandemic shut-down and rampant unemployment. That means the average wage index (AWI) was lower in 2020 than typical years. That’s bad news for people born in 1960, because the 2020 data will be used to calculate their Social Security benefits. Monthly benefits are calculated based on a formula using the AWI, the total number of years you worked, your wages over that time period, and the age at which you opt to start claiming benefits.
A CNBC report discovered that at one-point last year it was estimated that the 2020 AWI would be almost 6% lower than 2019. That could have cut benefits by about $120 per month. However, recent data from the Congressional Budget Office shows a much more promising forecast. It estimates the AWI will drop by just 0.5% from 2019 to 2020. That’s excellent news for the five million people whose Social Security benefits will be calculated based on the 2020 AWI.
Even if the AWI doesn’t decline drastically, Social Security advocates see this as a wake-up call. They say Congress needs to act now to prevent Social Security benefits from inadvertently going down in the future. Their argument is that it would be unfair to have a negative adjustment in one year for people turning 60, when there’s no negative adjustment for any other person receiving Social Security.
The Seniors Trust is working hard to improve Social Security across the board and increase benefits for today’s retirees and tomorrow’s. The Seniors Trust wants Congress to pass the Social Security Expansion Act. This landmark piece of legislation will increase monthly benefits, establish a fair COLA, and shore up the long-term solvency of our Social Security program.