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Will Pandemic Affect Social Security’s Future?

Category: Social Security

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.

The 2020 Trustees Report for Social Security had a less than definite answer for anyone wondering about that question: “The projections and analysis in these reports do not reflect the potential effects of the COVID-19 pandemic on the Social Security and Medicare programs. Given the uncertainty associated with these impacts, the Trustees believe that it is not possible to adjust their estimates accurately at this time.”

Covid-19 disruptions aside, the Trustees 2020 Report predicted no change in when the Old-Age and Survivors Insurance (OASI) Trust Fund (retirement portion of SS) would become exhausted, 2034. At that point the reliance on current payments into the system would mean that only 76% of promised benefits could be paid. In a rare piece of good Social Security news, the Disability Insurance (DI) portion of Social Security will be able to pay expected benefits 13 years longer than predicted in 2019; the new date is 2065.

Experts weigh in on the other side

While there were many who worried about the recession’s impact if it were to continue for a long time, there are just as many on the other side who are less concerned. Mark Hulbert of MarketWatch took exception to some of their “fear mongering”. His advocacy for less hysteria were interesting. For one, the actuaries who predict when and if Social Security reserves will run out build in many assumptions about the economy over the long run, including possible recessions as well as boomtimes. He also noted that some experts caution that if the recession were long-lived, people’s earnings histories would be affected, so their potential benefits would accordingly be trimmed. For those who cite problems to the reserves from retirees forced to take their retirement benefits at age 62 instead of waiting to Full Retirement Age or even later, he points out that the way the payouts are structured by the actuaries, on a macro basis it makes no difference how early or delayed payments are made.

Who Really Knows?

Hulbert asked Andy Landis, author of “Social Security: The Inside Story”, what he thought about the impact of Covid on the future of Social Security. Landis told him: “The size of the hit [on Social Security] could be a blip or a bomb crater.” So we will see, obviously much will depend on the depth and severity of the recession. Let’s hope for a quick return.

Comments? What is your bet on what will happen to Social Security from the pandemic? Please share your thoughts in the Comments section below.

MarketWatch article by Hulbert

MarketWatch – One Major Caveat

Posted by Admin on May 4th, 2020

15 Comments »

  1. I am wondering what the effect will be on the COLA this year.

    by Pat Reynolds — May 5, 2020

  2. I would not expect a COLA. Count your stimulus check as that.

    by Peder — May 6, 2020

  3. No one knows for certain at this point, but if a COLA is passed it will most likely be less than one percent. That is the talk here in Washington, DC.

    by Jennifer — May 6, 2020

  4. Anyone else want to join in crying “wolf” and “the sky is falling”?

    Why don’t we just raise the threshold of income for paying social security.
    Anyone getting up to $xxxxxxx. Put your own number in. Mine is $10,000,000.
    The rich are not abashed about taking handouts, tax dodges or anything else to not be taxed so let’s start getting them to pony up to balance things out.
    Maybe a tax of 0.5 percent on corporate earning would keep the system running forever.

    by Stephen Garanin — May 6, 2020

  5. I never expect any COLA. If one comes, I’m pleasantly surprised. I agree with Peder.

    by Elaine C. — May 6, 2020

  6. I am not concerned about the long-term viability of Social Security. The politicians will figure it out because as they know, Social Security is the third-rail of American politics. At some point they will do something to make sure that at least current benefits are maintained. To not do so would be political suicide.

    by JeffD — May 6, 2020

  7. Outsourcing has been promoted by the GOP since Reagan! This has resulted in a loss of good paying middle income jobs! Corporations should be held responsible for this gap in payments to FICA and pick up the kids! Corporations name trillion through outsourced jobs! This has never gone back into increased US facilities!
    Time for America wake up, with less than 2% of Americans owning 99% of the nation wealth something is very wrong! In 1957 the very wealthy were taxed at an 56% level! Today they have loopholes they pay nearly nothing! This is unfair !

    by Ron — May 7, 2020

  8. Alicia H. Munnell, the director of the Center for Retirement Research at Boston College, told Market Watch that the impact of the coronavirus might mean an earlier date for the Trust Funds to run out of money—2033. She cited the impact of the 2008 recession, which sped up the depletion date for Social Security’s Trust Funds.

    by Admin — May 9, 2020

  9. I wouldn’t make any bets on how the pandemic will affect Social Security. SS was already on shaky ground but there was a lot of resistance to make any substantial changes. Now the impact on the economy may actually require a major overhaul of it. I can see those who have long advocated big changes to the system being joined by the “OK Boomer” crowd that already resents paying into SS to do something, but what I have no idea.

    by Jean — May 10, 2020

  10. Not only if social security will be impacted, but what about retiree friendly states that do not currently tax income. (WY, SD, FL, NV, TX, TN). Illinois does not tax any pensions yet but they are trying. Will we see these tax breaks disappear? Kentucky recently reduced retiree exemptions from $41100 to $31110. Will other states be forced to follow? Nothing is free. Government has to get this free stuff from somebody.

    by Jim — May 10, 2020

  11. Will the pandemic affect Social Security, maybe if we allow it to happen, the attempts to use the virus are well underway:

    https://socialsecurityworks.org/2020/05/04/trump-no-coronavirus-aid-unless-congress-agrees-to-undermine-social-security/

    https://www.salon.com/2020/05/22/republican-plot-to-gut-social-security-behind-closed-doors-gains-steam-in-senate-covid-19-talks_partner/

    https://www.salon.com/2020/05/11/the-trump-administrations-monstrous-idea-direct-payments-in-exchange-for-social-security-cuts_partner/

    by Mike — June 3, 2020

  12. Social Security is easily maintained by proper taxation of wages , removing to upper limit on wages, and reducing benefits that do not directly allow senior citizens to live in a manner they planned for !
    ….

    by Ron — June 4, 2020

  13. Mike posted a comment to the effect that Sen Mitt Romney’s Trust Act would attack (cut) Social Security and Medicare.

    From Editor: Here is a link to a CNBC article that is a little more balanced.
    https://www.cnbc.com/2019/10/31/mitt-romneys-new-plan-to-fix-social-security-draws-critics.html

    by MIke — July 25, 2020

  14. What I posted was a link to an article that discussed the TRUST ACT being included in the next corona virus relief package. Since the topic is “Will Pandemic Affect Social Security’s Future?” I thought it was appropriate. I do question why Social Security and Medicare reform is part of a probably must pass relief package and I contacted my US Senators with my concerns. I wish the editor had linked to a current discussion of the TRUST ACT and virus relief and not one from 2019, long before the pandemic relief became an issue.

    Editor’s Comment: We agree that the pandemic might have some affect on the future of Social Security, and are happy that people like Mike are concerned how that might play out. Here is a link to a currrent response to that bill, with some additional explanations, by The Committee for a Responsible Federal Budget, an independent, non-profit, bipartisan public policy organization based in Washington, D.C. that addresses federal budget and fiscal issues. https://www.crfb.org/blogs/correcting-record-trust-act

    by Mike — July 26, 2020

  15. Once again Sen Romney introduced an unrelated amendment concerning Social Security into Covid legislation. Here is a list of how Senators voted:
    https://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=117&session=1&vote=00047&link_id=1&can_id=ab2490a3803606c27c78f56536736097&source=email-february-5-2021-friday-alert-retiree-news-7&email_referrer=email_1075134&email_subject=february-12-2021-friday-alert-retiree-news

    A position paper from the Alliance for Retired Americans explains their opposition to the act Romney favors: https://retiredamericans.org/wp-content/uploads/2021/02/TRUST-Act-Position-Paper-2021-one-column.pdf

    by Mike — February 12, 2021

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