The past few months have been the toughest on humanity and we are still fighting with it. Slowly the world has started taking place. This pandemic has impacted everything humans rely on like economic cost. Approximately 100,000 deaths have been reported in the U.S only and millions have lost their jobs. If such damage occurs then people look at their social security benefits and this has happened more than thirty-six million unemployment benefits from social security new claims have been submitted recently. The police and pandemic responses will be giving us long term outcomes in terms of economy and the federal budget. If you have the question in mind that the COVID19 pandemic will affect social security program responses then the answer is yes.
Every country has to put total lockdown for more than 5-6
months which has affected the economy of every country and there is no doubt
social security could have ever escaped its impacts. To understand that you
will have to study how social security is funded? This will help you in getting
a clear idea of why you are getting lower benefits.
How social security
is funded?
There are 2 trusts
which fall under the social security administration which are
- Ø The disability insurance trust and
- Ø The old age and survivors insurance trust fund
The main source for the social security funding is totally
on the payroll tax. This burden is shared by both employers and their
employees. OASI trust takes the share of the payroll tax 10.6%, 1.8% goes to
the disability insurance and the remaining goes to the hospital insurance for
Medicare Part A that is 2.9%. The majority of the United States population is
worried about the OASI funding that provides retiree benefits.
Some of the effects are mentioned below
Costs reduction
There are 3ways in which the COVID epidemic has lowered down
social security costs.
- 1. COVID 19 epidemic has increased mortality rates which lower down the overall benefits paid out of the trust fund.
- 2. Secondly, inflation reduction has lowered the COLA- the cost of living adjustment to social security advantage payments.
- 3. Thirdly, benefits which you claim initially at retirement fall due to 2 factors
a)
Reduction in the AWI-average wage index
b)
Dejected earnings record of beneficiaries,
several of whom lost their jobs.
Revenue Reductions
COVID 19 epidemic has also impacted social security revenue
and there are 3 primary ways in which it has happened which are
- 1. In the time's interest rate has been lowered which has reduced the interest income which trust fund receives.
- 2. Secondly, there has been a colossal loss of jobs in the United States; it has hugely impacted workers who get low wages, reduction in the revenues of payroll taxes.
- 3. Thirdly, we are still looking for the COVID vaccine and it will still take time, we have already very far behind when it comes to economy and prolonged low inflation times lowers the worker's earnings resulting in lower tax revenues which trust fund receives.
Payroll deduction
An economic or recession downturn
is definitely to injure the social security benefits like payroll taxes as many
have lost their jobs in 2020. This has
in return hurt the income of the social security program, which will force the
trust assets drawdown. The social security solvency is complicated though there
are many factors on which it depends like disability claims, a retirement that
is being claimed early now, growth/decline, change in the policy, longevity,
and novel revenue sources such as extra taxes, SS taxable wages base which will
lower down the shortfall and will raise surplus.
How it can be fixed?
Fixing social security is
definitely an entirely different matter, but because we are standing on the verge
of recession we should know what our options to get out of it are. Being
prepared is not a bad idea and this is what you will learn further.
There are many things that we have
to worry about these days. Each day when we are getting out we have to come
back home and need to survive that day so that our family back home can also
live. Preparing for the finances in a time of recession is something that you
must be worried about. The coronavirus pandemic has broken down social security
especially if you have been relying on it completely.
According to the center for
retirement research at Boston College 20% decline in the revenue of the payroll
taxes likely for 2 years. This is going to be the coronavirus impact on the
economy according to its report. This
report has been published so that it can help in illustrating how COVID 19
epidemic and economic climate are going to impact the social security administration's
ability to pay the social security benefits to its beneficiaries in 2020. It is
totally clear that beneficiaries who were relying on social security benefits
will have to suffer from disappointment in 2020.
Final verdict
2020 is going to be the hardest
year for humanity and it is already proven. Still, we might have to go long
way. So if you were relying on social security benefits you must gather more
finances because the recession is going to knock on your door soon. If you have
already lost your job you must find other ways.
COVID has impacted every aspect of our daily life and social security is
certainly not immune from it.
It is mentioned above that social
security gets its from payroll taxes which come from employees and employers,
but many have lost their jobs and now revenues have been decreased, so there is
no other way social security administration can be funded. Beneficiaries might also find it challenging
to get their applications accepted in 2020.
To get more updates you must visit
the social security administration's official website. You must also check your social security
accounts to get more information and to check the status of your
application. It will be a good idea to
keep yourself updated so that you can take action on time which is important
for your financial status.
