From Think Advisor:
If Congress does nothing to shore up the
Social Security Trust Fund, benefits will be cut 21% when the [trust] fund is
depleted, which could happen as soon as a dozen years from now if not
sooner. ...
Pre-retirees born in 1960 may suffer another blow to benefits. That’s because the Social Security Administration employs a complicated formula to calculate benefits, which includes using the top 35 years of a retiree’s earnings, adjusted by an indexing factor. That factor, in turn, is based on the Average Wage Index for the year an individual turns 60, which will be 2020 for those born in 1960.
Job losses and declines in average wages this year due to the pandemic will affect the average wage index, which has risen almost every year since the 1950s, according to Wade Pfau, director of the Retirement Income Certified Professional (RICP) program at the American College of Financial Services. The index fell in 2009 but only slightly, according to Pfau.
“We don’t know what will happen this year but if the average wage index has a dramatic drop, then suddenly those born in 1960 would have a lot lower benefit than those born in 1959,” said Pfau. ...
People are being laid off in this recession in numbers not seen since the Great Depression but I don't know that average wages have been cut. We'll see. I started to compare this to the Notch Baby controversy but unlike that controversy this could be real. I've probably made some old timers mad at me for even mentioning "Notch Babies"! Sorry to bring up the bad memories!
