The coronavirus outbreak is already having severe effects on the U.S., and many are stipulating the likely impacts on Social Security benefits.
Will the Coronavirus Pandemic Affect Social Security?
Coronavirus (COVID-19) Economic Effects
As of April 4, 2020, over one million coronavirus cases have been reported, and positive people with the virus have now been reported in every state in the United States.
There has already been an impact on the global economy, and there will likely be a longer-term economic impact. Experts have already suggested that the U.S. could enter a recession in the next few months.
The coronavirus stimulus bill, the CARES (Coronavirus Aid, Relief, and Economic Security) Act, provided a $2 trillion financial stimulus package to relieve the nation’s families, businesses, and workers.
Despite Social Security benefits having little to do with the disease itself, it has much to do with how the coronavirus epidemic will affect the U.S. economy.
Payroll Tax Collection Reduced
Three sources fund Social Security. Tax on earned income at 12.4%, the interest that this income makes, and the taxation on benefits. The majority of the fund comes from the tax on earnings up to $137,700 (in 2020).
The Tax Cuts and Jobs Act (TCJA) 2017 reduced the tax liability of most employed Americans and resulted in a stimulated economy through business growth and increased consumer spending. As more people became employed, more tax collection was paid into the Social Security program.
As the coronavirus epidemic forces more businesses to shut down, more employees will be earning less this year resulting in a reduced payroll tax collection. The CARES Act has gone some way to reduce these effects. However, there is still likely to be more expenditure from the Social Security program than what it collects in 2020.
Contacting The SSA
All local Social Security offices, around 1,200 throughout the nation, are now closed to the public for in-person services since March 17, 2020.
This decision was taken to protect the population served by the SSA, particularly “older Americans and people with underlying medical conditions” during the Coronavirus (COVID-19) pandemic and their 61,000 strong workforces.
The SSA is also promoting a “work from home quarantine” to ensure their employees at higher risk are further protected, such as those with existing medical conditions, elderly or pregnant.
Although in-person interactions could be limited for a number of months, the Social Security Administration (SSA) is still providing critical services during the shutdown. Most employees are working from home, so a majority of routine services are still available.
The SSA can still be reached via their website and their toll-free line, (800) 772-1213. The agency has urged people to contact them where possible online as phone representatives are required to deal with urgent requests.
Existing beneficiaries can log into their SSA accounts and review statements, change personal details, and apply for a replacement SS card, amongst other functions.
New applicants can sign up for a Social Security account and use the various benefit planners to check eligibility and how to apply for retirement, disability, or survivor’s benefits.
Field agents will offer in-person support but only for a concise list of vital services such as people in dire need of eligibility decisions or reinstatement of benefits in dire circumstances.
Social Security Impact on Cost of Living Adjustment (COLA)
October sees the next year’s COLA announcement, which regulates what Social Security income recipients will obtain. It determines what increase in benefits each recipient will receive to ensure they can afford the rising cost of goods and services.
Usually, the adjustments are based on changes in the cost of living and projected inflation.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) influences the adjusted figures. The variations in the cost of living will be worked out by comparing the typical CPI-W for the third quarter of 2019 to 2020 (July to September).
If there is a positive increase of a minimum of 0.05% from one year to the next, then Social Security beneficiaries will get a relative increase in benefits paid from December 2020.
If there is a decline, then benefits remain unchanged for the upcoming year as no COLA is passed on to recipients.
To calculate the CPI-W experts use various spending categories, such as housing, transport, medical costs, household goods, and sustenance.
When President Trump declared a national emergency, the subsequent demand for household goods and food has increased throughout the U.S.
Due to concerns that the pandemic may adversely affect economic growth, crude oil prices and demand have plummeted, causing a drop in energy prices. With a possible recession looming, there is a strong likelihood that third-quarter figures 2020 will be lower than last year’s figures, meaning no COLA for 2021.
Also, studying current economic trends might give you at least some idea of how Social Security recipients may be affected by the coronavirus, despite the forthcoming COLA update, not arriving until October.
The Future of Social Security
The coronavirus is transforming the world, and the U.S. Social Security will be no exception. That said, payment won’t stop, and the system is not going to deny those who rely on Social Security benefits.
Any adjustments that are made should still ensure that recipients of Social Security Disability Income (SSDI) and Social Security Income (SSI) can afford basic needs. If goods and services prices do drop, then technically recipients could be better off.
Are you worried about how your Social Security benefits might be affected by the coronavirus? Share your experiences in the comments section below.