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Jun 25, 2020

I Agree But Do You Have To Use That Word "Notch"?

From an earlier "Notch Baby" controversy
     From Paul N. Van de Water writing for the Center on Budget and Policy Priorities:
The next COVID-19 relief bill should fix an unintended benefit “notch” under which, due to the pandemic and resulting recession, Social Security benefits will be significantly lower for workers who turn 60 this year and will be eligible for early retirement benefits in 2022. Those becoming eligible for disability or young survivors benefits in 2022 will also see lower benefits. ...
Normally, average earnings in the economy rise from one year to the next. Due to the sudden, sharp unemployment increase in 2020, however, many workers will suffer a big decrease in their annual earnings. And those decreases will cause the economy-wide average annual wage to fall as well. That, in turn, will reduce the average indexed earnings and Social Security benefits of workers turning 60 in 2020 compared to those with similar earnings who turned 60 in 2019. If the average wage falls by 5 percent in 2020, as now seems likely, the retirement benefit of a 60-year-old worker with average earnings will drop by about $1,200 a year for each and every year of retirement. If the average wage falls more, the decreases will be even larger. ...
Policymakers should fix this unfair result. One solution would be to specify that the wage-indexing factor couldn’t fall from one year to the next, even when the average wage index declines. ...

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