Record Social Security COLA Coming

October 13, 2021 — Social Security and Supplemental Security Income (SSI) beneficiaries will receive a record 5.9 percent Cost of Living Adjustment (COLA) for 2022. It is the largest COLA since 1982. The increase is based on the Consumer Price Index (CPI-W) from the third quarter of 2020 through the third quarter of 2021. It translates to a $92 monthly increases for the average Social Security recipient, which will be welcome news to people seeing consumer prices rising all around them because of the pandemic and worldwide shortages. According to the SSA, 37% of men and 42% of women get at least half their income from Social Security.

The maximum taxable earnings (OASI) for 2022 will increase from $142,800 to $147,000 in 2022. The retirement earnings exemption limit increases by $600 to $19,560 ($1 withheld for every $2 dollar over that until Full Retirement Age). In the year someone reaches Full Retirement Age the exemption limit increases by $1,440 to $51,960 ($1 deducted for every $3 over the limit). Here is a link to the Social Security Fact Sheet.

Comments? Do you think the COLA will be enough to offset what you are seeing happen to your budget? Please share your thoughts in the Comments section below.

For further reading:
Overlooking Spousal Benefit Could Leave Him Clipping Coupons

September 8, 2021 — The latest Trustees report for Social Security shows that the COVID-19 pandemic and the 2020 recession are affecting the future of this popular program, but no one is certain exactly how that will play out. One thing the report does lay out is that the Trust Fund will become exhausted in 2033, one year earlier than projected last year.

Given the unprecedented level of uncertainty, the Trustees say there is no consensus on what the lasting effects of the COVID-19 pandemic on the long-term experience might be, if any.

Based on best estimates, the 2021 reports show:

• The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2033, one year earlier than reported last year. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76 percent of scheduled benefits.

• The Disability Insurance (DI) Trust Fund, which pays disability benefits, will be able to pay scheduled benefits until 2057, 8 years earlier than in last year’s report. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 91 percent of scheduled benefits.

So many conflicting currents

The Covid pandemic caused millions of people to lose their jobs, meaning they did not pay into the Social Security system. Many people became disabled, which increased payouts by the Disability Trust Fund. On the other hand, over 650,000 people have died from the virus, so those people will not be around to collect their Social Security (although any survivors will). Immigration numbers are down, which means fewer people are paying into the system. Fertility rates declined in this period of uncertainty, which will have long term effects on the size of the workforce supporting retirees. How all of these factors play out, no one is sure.

Bottom line for lawmakers – do something!

The Trustees report finishes with this stern warning: “Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. Lawmakers should address these financial challenges as soon as possible. Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.” We couldn’t agree more – quit fighting silly political battles and do something about the ticking time bomb that is going to blow up Social Security!

For further reading:
Summary of the Trustees Report

Comments? If you were in charge, what would you do to save Social Security?

April 5, 2021 – Naturally enough, most people concentrate their focus on their own Social Security retirement benefits. If they are careful, they compare the advantages of taking it early (as soon as age 62), waiting to Full Retirement Age (FRA, which is 67 for those born 1960 or later), or hanging in to get the maximum benefit at age 70. While it is great to know your own situation, most people overlook the importance of the benefits that might apply to their spouses. For some couples, particularly where one member earns much more than the other and Social Security will be the major source of income in old age, a bad decision can be disastrous down the road. This article will lay out the issues involved, so people can decide the best strategy for maximizing their Social Security spousal benefits.

There are two different scenarios to consider: spousal benefits while you are both alive, and survivor benefits when you depart this world. Let us take them one at a time.

1. Spousal benefits while you are both alive.

July 4, 2020 — Our friend Robert Powell at TheStreet.com just wrote a very helpful article for people who worked for governments or non profits and did not pay into Social Security for much of their work lives. They are usually concerned that they won’t get Social Security retirement payments. In “Did You Work for a Government and Not Pay Social Security“, Powell writes to straighten out some misconceptions.

The Windfall Elimination Provision (WEP) reduces your Eligibility Year (ELY) benefit amount before it is reduced or increased by early retirement, delayed retirement credits, cost of living adjustments (COLA), or other factors. If applied, your Social Security retirement payments will be lowered.

May 4, 2020 — When the coronavirus pandemic first arrived on our shores one of the first thing many people added to their list of worries was its potential effect on the viability of Social Security. Those of a negative mindset were drawn to two main concerns about its funding: shortfalls caused by the vast number of newly unemployed not making FICA payments, and new distributions made to people forced to take their Social Security retirement early at 62. The effect, they hypothesized, might be that the Social Security Trust Fund would become exhausted earlier than expected, and promised payments to retirees would have to be either trimmed or subsidized by the federal budget.

April 21, 2019 — Deciding when to take Social Security retirement benefits is always a complex question. Now the devastating impact of Coronavirus is making it even harder. Here are some thoughts that might help on a question that always has many possible answers.

The New York Times reports in “Taking Social Security During the Pandemic” that workers in the past decade have shown a steady trend of postponing when they take Social Security, as a way to increase their potential lifetime retirement benefits. Whereas most workers still take Social Security the first chance they get at age 62, to get higher benefits more and more have been waiting to their Full Retirement Age (66-67), or even to age 70. With the arrival of the coronavirus pandemic experts are wondering if that trend will stop, or even reverse itself.

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December 28 , 2019 — Social Security is the single most important source of retirement income for most people. So it is crucial that you understand how the rules apply to your situation.  Here are three important things you need to understand about how Social Security works.

1. Know when to claim

The earliest you can claim is age 62.  Your Full Retirement Age (FRA) is somewhere between 66 and 67, depending on your birth year (if born before 1954 it is 66 and increases one month per year after that up to 67). Your benefit maxes out at age 70; there is no advantage in waiting past that.  if you file at age 62 you will only get 75% of what you would get if you wait to your FRA. If you claim between your FRA and 70 your benefit will increase by 8% a year.  You can file for your benefits online or in person.

December 11, 2019 — You can always expect a lively debate on this subject: should you wait to claim Social Security, or take it as early as age 62? No matter your opinion, it is indisputable that claiming later than your Full Retirement Age (66 or later) provides an attractive 8% increase per year yield (plus COLA). Now a new study suggests that the 8% per year reward for waiting is too high, and the penalty for claiming early is too severe. Note: Shoutout to Maimi for bringing this study to our attention!

The study, “Are Social Security’s Actuarial Adjustments Still Correct“, comes from the Center for Retirement Research at Boston College. When Social Security started to allow beneficiaries to claim early or delay to age 70 it used actuarial adjustments designed to keep lifetime benefits constant for an individual with average life expectancy. In other words, no matter when you take your Social Security benefits, the odds are that you will receive the same amount of money.

November 18, 2019 — Late last month it was announced that Social Security and Supplemental Security Income (SSI) benefits for nearly 69 million Americans will increase 1.6 percent in 2020. This follows increases of 2.8 percent in 2019, 2% in 2018 and .3% in 2016. 

The 1.6 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 63 million Social Security beneficiaries in January 2020.

The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $137,700, up from $132,900. Separately, Medicare.gov announced that Part B premiums in 2019 will increase by $9.10 a month to $144.60 for most recipients.

November 16, 2015 — The biggest change affecting Social Security benefits in at least 15 years is about to go into effect on April 30, 2016. It is a change that could cost certain beneficiaries $50,000 over a lifetime. As with any major change to a benefit program there has been a lot of confusion over who is affected and how – this article will explain how it will affect you.

We were fortunate to have Kurt Czarnowski, a 34 year veteran employee of the Social Security Administration and leading expert on the subject, explain the changes to us in practical terms. Here is what we learned from Kurt about how various groups are affected.

File and Suspend and Restricted Benefit
The Budget Bill passed by Congress and signed by the President in early November included changes to (more…)