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:
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 of 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 your 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 adjust according to
inflation. And in the end, the outcome is the SS benefit amount you will be
going to get upon 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 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 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 in 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 more affected to a great extent.
Final verdict
There is no doubt in saying that the Covid-19 pandemic has
actually impacted the lives of people everywhere including their businesses,
professions, or 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.
