Born in 1960? Expect a Big Social Security Cut

[rothlev]

Does this mean when the national average salary is calculated for 2020 that the social security statements that have been sent out for those who turn 60 this year will have been wrong, and that the new statements will show the downward adjustment?

 

[cathy63]

Does this mean when the national average salary is calculated for 2020 that the social security statements that have been sent out for those who turn 60 this year will have been wrong, and that the new statements will show the downward adjustment?

(Are they still sending statements out? I thought you had to get them online nowadays.)

Yes, any number you get from the SSA before age 62 is an estimate. All these future numbers are "wrong" by some amount, but the number for those born in 1960 is currently wrong by a much larger amount than is typical.

Nobody knows if or when SS will start using a different estimated AWI in their calculations for this age group, so it's impossible to say when a new statement would show the lower benefits. If they use info from the next trustees report, that will be April 2021, or if they wait for the actual 2020 AWI to be calculated, that will be November 2021.

 

[gwraigty]

It would be interesting if people who are 60 this year could make a note of what their SS statement estimates their benefit to be, and report back on any notable decreases because of a reduced AWI for 2020.

 

[rothlev]

It would be interesting if people who are 60 this year could make a note of what their SS statement estimates their benefit to be, and report back on any notable decreases because of a reduced AWI for 2020.

#1 yes, I would like to see that information

 

[Dtail]

It would be interesting if people who are 60 this year could make a note of what their SS statement estimates their benefit to be, and report back on any notable decreases because of a reduced AWI for 2020.

I will volunteer, as I look at the SS website every year when the numbers are adjusted at the end of the year.

 

[Htown Harry]

Here is a financial blog post that I found helpful in understanding the math:
https://financialducksinarow.com/14070/babies-from-1960-2020-is-a-year-youll-never-forget/

 

[CaptTom]

It would be interesting if people who are 60 this year could make a note of what their SS statement estimates their benefit to be, and report back on any notable decreases because of a reduced AWI for 2020.

I can check, too. When would we see the change?

I generally pull the numbers about once a year. I could look again in 2021 and see if it went down. Or would it already be reflected?

 

[MrLoco]

One of us turns 60 this year.

We will stop all charitable contributions.

This will more than make up for any future decrease in benefits.

Problem solved.

 

[ceciledian]

I am a 1960 model too. This is just great.

I am assume we have people on this message board that turned 60 during the worst of the 2008-2009 downturn. Any testimonials on how their social security was impacted?

SSA.gov has an AWI chart, it doesn’t appear the Great Recession had as severe an impact as what is projected for us 1960 kids.
https://www.ssa.gov/oact/cola/AWI.html

 

[FI FELLOW]

Whew! Born late November 1959. Made it by 5 weeks!

 

[SpinDoctorTX]

Wow... I used to think that being a decade kid was kinda cool. Maybe not so much. I need to look into this further.

 

[LastBoomer]

Talk to your Representative. The fixes required to SS are so minimal, but no elected official has the political will to deal with it. Term limits would fix that.

 

[zippy2020]

Wow, this was a very interesting discussion (and thanks to those who posted explanations - numbers give me a headache, LOL)!

I had no idea this AWI even existed. Just depended on my annual mailed statement all those working years, and figured it would be sorta/kinda around the numbers listed.

Ah, the things you never learn in school......

I'm an older Boomer so it seems I lucked out. From the SocSec AWI chart:

2013 44,888.16 - would have been the first year I was eligible (62). We didn't need the money so I delayed taking it.
2014 46,481.52
2015 48,098.63
2016 48,642.15
2017 50,321.89
2018 52,145.80 - I filed in February, mostly on impulse, age 66 yrs 8 mos.

If I had waited until I was 70, as so many experts recommend, that would mean I would have filed in.....Spring 2021. Yikes!

 

[Gumby]

As I understand the earlier posts, the only AWI that matters is the year you turn 60, which for you would have been 2011.

 

[carty1]

Railroad Retirement Affected?

Wonder how/if any this affects Railroad Retirement?

 

[Perryinva]

It doesn’t. And only the year you turn 60 matters. All subsequent AWIs mean nothing. Previous to age 60 AWIs were only used for estimating, as they established the bend points and max AIME levels. It’s somewhat important to remember what the AWI is used for. It is used to index your top 35 years SS earnings against the age 60 AWI. The biggest % effect would be on people that have 35 years of maxed SS earnings that occurred before they turned 60, the more time before 60, the worse. The least effect would be on people that had max earnings over say the last 10 years, and much lower earnings all previous years. The multipliers are fairly small for the last 10 years, as the AWI has increased fairly small percentages as of late. In the late 70’s through the ‘80s the gains were much larger, so if all your max earnings were then, the hit is larger than recent years where they were 1.xx. Sadly, 2020 was predicted to be one of the highest gains in quite a while. Of course, no one has seen their results of those estimates, so it is pretty tough to tell exactly how much you “lost” unless you do it manually based on predictive AWI. The SSA USED to publish the manual calculation chart every January with the bend points and multipliers already filled in. All you had to do was fill in your earnings and you got the FRA PIA. They stopped publishing that chart for anyone that turned 60 in 2017 and later.

 

[Svensk Anga]

I wonder how the lockdowns will affect the kids who normally get summer jobs. If that is substantially diminished, it could keep a lot of very low W2’s out of the average. Maybe it won’t turn out that bad.

I’m watching because DW is a 1960 model. I’m a ‘59. We can’t be hurt too badly though because pre-Covid her benefit was running right near half of mine. Worst case she gets spousal instead of her own. Can’t get delayed retirement credits on spousal though.

Regarding the proposal up-thread about changing from wage indexing to CPI prior to FRA, be careful what you wish for. The reason that SS is indexed to AWI is that AWI grows faster (usually), than CPI, reflecting a generally rising standard of living. AWI indexing was intended to keep folks up with the prevailing standard of living. Without that one would have fallen behind about 2%/year. Wholesale rework of the formula would be a convenient way to sneak in a benefit cut. It could be stealthy too, where the immediate cut is nil, but it grows year by year. Actually, that sounds like a politically feasible way to move the system toward long term solvency.

 

[rrppve]

Since I’m in the 1960 cohort, along with my HS and college classmates, I’d like to figure out a way to advocate for a change in DC to address this issue, either ad how or permanent. My congressional representative’s staffer on social security is aware of the issue. I also forwarded the UPenn working paper to the staff, and will probably have a call with them next week.
Anyone have any legislative lobbying experience or particular insight that they would like to lend to an advocacy effort? Please PM me.

 

[CaptTom]

Yes, we need a lobby.

It would really suck to get screwed out of a (remaining) lifetime of SS over this one blip. The problem with our system is that "majority rules." Anyone born in one specific year is in a very small minority. Probably not enough to affect any elections.

What's worse, my friend born a couple of months before me in 1959, whom I always tease about being older, is going to get the last laugh.

 

[oldphd]

What's worse, my friend born a couple of months before me in 1959, whom I always tease about being older, is going to get the last laugh.

So it's your fault! Bad karma...

From a fellow 1960er...

 

[Dash man]

So it's your fault! Bad karma...



From a fellow 1960er...

My poor sister in law was born in 1960. She never gets a break.

 

[doxiemama]

Well great! Child of 1960 here, first COVID-19, massive unemployment, rioting, and now this. Already gave up a trip to Hawaii and was laid off from my "retirement" part-time job. Although the government unemployment thru July is a windfall for part-time workers. Making double and saving every penny of it!

Have a government pension and savings but wanted to work part-time till 65. Well forget that! Now will file at age 62. How many of us out there doing that? Claiming early due to massive loss of jobs.

Oh well life changes! A bigger concern of mine is the 25 million or so that are still unemployed (down from 40 million) are no longer paying into ss. I know the President talks about a payroll tax, meaning less going into ss from employer and employee.

If my future checks drop by a small amount that does not worry me as much as the fact the the funding into the system has tanked and will continue to be low until we go back to full employment. How that will impact our benefits in the future That worries me more. In my family the average age of death for females is 92 and a Aunt just died at age 103 from COVID-19. Probably would have made it to 105!

Any more good news out there to share with the 1960 babies?

 

[RetireBy90]

Anyone have any legislative lobbying experience or particular insight that they would like to lend to an advocacy effort? Please PM me.

I would think AARP might be an effective advocate for this as they already have plenty of influence with the boys and girls in DC.

 

[Texas Proud]

Have not gone through all the posts...



But from some of the news I have seen recently the avg wage is going UP... now, I do not know how this affects the number used by SS...


The explanation is that the white collar are still working and the blue are the ones that are not... so low wages drop off, avg goes up...

 

[Time2]

Also born in 1960 - may have to have a serious word with my parents why they picked that year However, in the Bogleheads discussion, one can also find the following quote:

"The National Average Salary (or the National Average Wage) is the mean salary for the working population of a nation. It is calculated by summing all the annual salaries of all persons in work and dividing the total by the number of workers."

(Boldface by me). If that is the case, there may be at least some hope if the unemployed are not counted in the number of workers, at least for the time during which they were without work. This would be the reasonable way to count such an average - but of course you can't count on "reasonable" for anything coming out of Washington... But if the average is indeed calculated in this "reasonable" way, the situation may not be quite so dire, since those that didn't lose jobs may not have seen their salaries drop much on average, so the effect would be much smaller.

It seems we would need to have somebody study the details of the law or the SS regulation; I am not quite sure where to look myself, but perhaps others here have an idea?

I suspect if you get a W2, you would be counted as working. Most stay at home orders were after March 15, so that's 2-1/2 months plus what ever work happens near the end of the year.