SS increase of 3.7%?

[boilerman]

Hi - I’m wondering if anyone can tell me why my social security benefits projection would go 3.7% since last July.

I quit work in early 2018 and no income since then. Both projections are from the My social security website. I am currently 60 and the website assumes my income will continue to be zero.

I expect some increase due to the annual inflation adjustment. But my monthly benefits estimate went from $2190 in July 2020 to $2272 in May 2021. That’s 3.7% by my calculation, which is higher than the annual inflation adjustment last year.

Not complaining. Just wondering why?

 

[N02L84ER]

It goes up by inflation after age 62. Until age 60 it goes up by the National Average Wage Index Series which went from $52,145.80 to $54,099.99 at the last update. This was a 3.75% increase.

 

[audreyh1]

What happens between age 60 and 62?

 

[latexman]

What happens between age 60 and 62?

Nothing, wrt indexing. "Indexing brings nominal earnings up to near-current wage levels". Near-current = age 60. After 60, your earnings are what they are, up to the maximum taxable amount.

 

[boilerman]

Ok thanks! It sounds like this indexing at 60 is now final. I had heard last year that those of us born in 1960 might be hurt due to the lower average wages due to the pandemic. Is that still possible?

 

[audreyh1]

Nothing, wrt indexing. "Indexing brings nominal earnings up to near-current wage levels". Near-current = age 60. After 60, your earnings are what they are, up to the maximum taxable amount.

So are you saying COLA adjustment starts at age 61? Or 60?

 

[latexman]

So are you saying COLA adjustment starts at age 61? Or 60?

I didn't say anything about COLA adjustments.

To be clear, this discussion is about the SS formula to calculate your "average indexed monthly earnings" (AIME). At age 61 and later, SS does not adjust your earnings with a COLA, per say. They do COLA adjust their "maximum taxable amount" of earnings each year. In 2020, the MTA is/was $137,700/year. If your 2020 earnings are < MTA and you are > 60 y.o., the SS formula uses your 2020 earnings as is. If your 2020 earnings are >= MTA and you are > 60 y.o., the SS formula uses $137,700/year. In either case, your 2020 earnings/MTA will not be indexed or COLA'd by SS, because after age 60 you are at "near-current wage levels" and it (your earnings/MTA) is what it is.

Now, a different subject entirely, if you did get a merit raise for 2020, hopefully it met or exceeded 2020's COLA, but SS will not index or COLA it further after age 60.

 

[audreyh1]

I asked N02L84ER my question. He mentioned inflation [adjustment].

 

[N02L84ER]

Ok thanks! It sounds like this indexing at 60 is now final. I had heard last year that those of us born in 1960 might be hurt due to the lower average wages due to the pandemic. Is that still possible?

I don't think your indexing number is final yet. The average wages I quoted were for 2018 and 2019. The 2020 average wage has not yet come out and I believe it will be the final number used for your age cohort.
OTOH when I last looked on the IRS web site, I saw an age 62 instead of age 60 when referring to the AIME. So, I am not at all sure what happens between ages 60 and 62. I am currently 61 and I am waiting to see what happens to my numbers when the 2020 average wage comes out. HTH

 

[Dtail]

So are you saying COLA adjustment starts at age 61? Or 60?

Not quite sure, but believe the COLA adjustment starts at 61, but the adjustment for age 61 is based on age 60 and thus that is why those born in 2020 had to be concerned with the Covid effect on AIME.

 

[audreyh1]

You mean born in 1960?

 

[boilerman]

Not quite sure, but believe the COLA adjustment starts at 61, but the adjustment for age 61 is based on age 60 and thus that is why those born in 2020 had to be concerned with the Covid effect on AIME.

Has anyone heard whether any adjustment is being made for those born in 1960 due to the pandemic?

 

[SecondCor521]

Has anyone heard whether any adjustment is being made for those born in 1960 due to the pandemic?

I haven't.

One source I read a while ago thought that the pandemic might not hurt wage growth as much as first feared. For two reasons:

First, low income people would be more likely to go on pandemic unemployment assistance, dropping out of the workforce temporarily and eliminating some of the lower income data points - so this would create an upward influence on the average wage.

Second, and a bit surprising to me, is that while there was a lot of economic upheaval due to the pandemic, there were a lot of people who actually had really good income years in 2020. These people may tend to be on the higher end of the income scale, but that would still increase average wages, I think.

I'm fairly certain there have been no legislative changes even being proposed to address the issue, let alone passed into law. And while it may get talked about here and may be an occasional talking point for our esteemed government leaders, I don't think it's a big enough issue to garner any sort of legislative momentum to address.

 

[Dtail]

You mean born in 1960?

Yes sorry born in 1960.

 

[Dtail]

Has anyone heard whether any adjustment is being made for those born in 1960 due to the pandemic?

Haven't heard any updates.
Supposedly the adjustment estimate was not going to be as bad as originally thought, but still any negative or close to zero increase has a lifetime effect.

 

[boilerman]

I haven't.



One source I read a while ago thought that the pandemic might not hurt wage growth as much as first feared. For two reasons:



First, low income people would be more likely to go on pandemic unemployment assistance, dropping out of the workforce temporarily and eliminating some of the lower income data points - so this would create an upward influence on the average wage.



Second, and a bit surprising to me, is that while there was a lot of economic upheaval due to the pandemic, there were a lot of people who actually had really good income years in 2020. These people may tend to be on the higher end of the income scale, but that would still increase average wages, I think.



I'm fairly certain there have been no legislative changes even being proposed to address the issue, let alone passed into law. And while it may get talked about here and may be an occasional talking point for our esteemed government leaders, I don't think it's a big enough issue to garner any sort of legislative momentum to address.

Ok thanks. It’s not like I ever counted on getting all the SS promised. Like many, my planning discounted SS benefits.