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Born in 1960? Expect a Big Social Security Cut
Old 05-25-2020, 02:28 PM   #1
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Born in 1960? Expect a Big Social Security Cut

For those born in 1960, the unemployment arising from the COVID-19 pandemic will cause a decrease the Social Security benefit from 9-14%. Part of the benefits calculation uses the Average Wage Index for the year a person turns 60. The AWI for 2020 was projected at $55,642, now it’s expected to fall to $50,171.

Wages earned before turning 60 are adjusted to the AWI for the year a person turns 60. The higher the index the year you turn 60, the bigger the adjustment, and the lower the index...

This impacts your entire lifetime of benefits if you are one of the unlucky ones, ranging from $24k to $85k depending on earnings and life expectancy. Contact your congressional representatives and ask them to address this if you were born in 1960.

https://www.forbes.com/sites/bobcarl.../#1d55a2825245
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Old 05-25-2020, 02:38 PM   #2
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I was born in 1960. Unbelievable.
See the below Bogleheads discussion below.

https://www.bogleheads.org/forum/vie...11036&start=50
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Old 05-25-2020, 03:17 PM   #3
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‘The indexing takes place for the year you turn age 60 and ends there. Those born in 1960 reach their 60th birthdays in 2020. Earnings after age 60 aren’t indexed.’

Im not sure what this means. So if you are 59 or 61 , u are not affected? It say .. you turn age 60 and ends there
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Old 05-25-2020, 03:26 PM   #4
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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?
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Old 05-25-2020, 03:31 PM   #5
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I was born in 1960 and DW starts Medicare this year. Double whammy.

We’re still not going back to w*rk.
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Old 05-25-2020, 03:35 PM   #6
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Originally Posted by cyber888 View Post
‘The indexing takes place for the year you turn age 60 and ends there. Those born in 1960 reach their 60th birthdays in 2020. Earnings after age 60 aren’t indexed.’

Im not sure what this means. So if you are 59 or 61 , u are not affected? It say .. you turn age 60 and ends there
All your prior earnings are reindexed to a formula using wage earnings at 60 years old. This is part of the formula used to payout future SS along with cola increases which is separate.
Thus if there are large wage decreases this year, one's future payouts will be decreased if one turns 60 this year.

It is more involved, but this is a start.
I know from other posts that @Perryinva understands these concepts quite well.
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Old 05-25-2020, 04:25 PM   #7
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Isn't that awesome. Yep, born in 1960. Certainly not the best news I've received today.
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Old 05-25-2020, 04:51 PM   #8
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On the plus side, the tax torpedo I was anticipating in 10 years just got significantly less severe...
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Old 05-25-2020, 04:55 PM   #9
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On the plus side, the tax torpedo I was anticipating in 10 years just got significantly less severe...
Probably 12 years now. RMD age raised to 72 by recent law.
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Old 05-25-2020, 05:19 PM   #10
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Ouch!
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Old 05-25-2020, 05:24 PM   #11
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Does unemployment affect wage index, I would think average wage index would be an average of people who are working as mentioned, but what about someone who was working part of the year?
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Old 05-25-2020, 05:25 PM   #12
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I was born in 1961. Retired last year. Will this affect me?
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Old 05-25-2020, 05:37 PM   #13
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Does unemployment affect wage index, I would think average wage index would be an average of people who are working as mentioned, but what about someone who was working part of the year?
That is one of the big questions. If done by common sense (which is of course not a given with the SS Administration), they would somehow prorate by months employed or something like that.

However, depending on the specifics, there is a possibility of even the opposite effect: considering the unemployed are predominantly lower wage service type jobs, if they are not counted in the calculation, then it's quite possible the average over all employed would even go up. So this needs to be researched in detail.
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Old 05-25-2020, 05:37 PM   #14
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I was born in 1961. Retired last year. Will this affect me?
Only folks that were born in 1960, unless the economic fallout affecting the downward movement of average wages continues into next year.
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Old 05-25-2020, 06:53 PM   #15
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Does unemployment affect wage index, I would think average wage index would be an average of people who are working as mentioned, but what about someone who was working part of the year?
Here is some historical info on how AWI has been calculated over time: https://www.ssa.gov/OACT/NOTES/note133.html

And the specifics for 2018: https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2018

From a quick skim, it appears that the salary data is the sum of box 3 on all W-2s and the divisor is the number of W-2s. A W-2 cannot tell you how many months someone was employed during the year, and it does not include unemployment compensation received, so those things cannot be taken into account.

With a quarter to a third of the workforce unemployed for several months, and many companies cutting pay across the board, I don't see how this number cannot go down, even if people on the lower end get extra overtime hours and hazard pay.
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Old 05-25-2020, 07:05 PM   #16
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I’m confused. But 1959 was OK I guess.
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Old 05-25-2020, 08:55 PM   #17
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I’m confused. But 1959 was OK I guess.
See the Bogleheads thread linked earlier for more details - unless that thread itself is what caused the confusion.

Yes, a 1959 b'day is unaffected.
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Old 05-25-2020, 09:27 PM   #18
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not cool. Hope they address this somehow.
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Old 05-25-2020, 09:34 PM   #19
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I was born in 1960 and DW starts Medicare this year. Double whammy.

We’re still not going back to w*rk.
Me too on both (I was born in 1960 and DW is going on Medicare this fall, as she is 5 years older than I). It's bad enough interest rates are effectively 0 right now and now this!

Not going back to work either, as we still have enough funds. A third of it is in cash, thus my displeasure with the current low interest rate environment.
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Old 05-25-2020, 10:00 PM   #20
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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?
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