May 25, 2010 — Social Security recipients born in certain years have been notched before – notably those born in 1917-1921. Those unlucky souls didn’t receive social security benefits quite as generous as those born in 1916 and before. Individuals in both groups, however, if they lived long enough, probably received far more in benefits than they ever paid into the system.
Now, according to the Boston College Center for Retirement Research, a new notch has been created – one affecting people born in 1947. The Center calculates that boomers born in that year might not receive as large a monthly payment as those born in the 1930-1946 birth cohorts.
The reason for their being short-changed has to do with the larger-than-usual 2009 COLA payments that their older brethren received, which took effect right after prices dropped due to the economic crisis. As a result of that large COLA followed by a decline in prices, there was no COLA at all in 2010.
Individuals who turned 62 in 2009 were unlucky about missing the 2009 COLA – their benefits will likely be lower than older recipients due to a quirk in the benefit formula. The math for how all of this happened is very complex, but the formula is spelled out in the Center’s Study, “A New Social Security Notch“.
The author of the Center for Retirement study, Andrew G. Biggs, suggests that to prevent such a ‘notch,’ policymakers could increase benefits for the 1947 group and modify the benefit formula to prevent a future recurrence. Given the pressure on the government to rein in spending on entitlement programs, legislative handicappers will have their work cut out for them.
For further reference:
Surprising Answer: When Should You Start Taking Social Security
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