Column: The coronavirus could cut your Social Security benefits for life, unless Congress acts

Social security benefits for Americans who will turn 60 this year could be cut for life as total wages are expected to fall sharply as a result of this year's economic downturn.
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The corona virus continues to confuse policymakers in their effects on public health, social structures and the economy. Social security advocates are now beginning to address the unannounced effects on millions of older workers
Simply put, anyone who turns 60 this year could experience a lifelong cut in social security benefits because the program's benefit formula has a peculiarity that makes it vulnerable to this year's economic downturn.
This is almost certain if Congress doesn't take any action by adopting a one-time solution. The damage was felt between 3 and 5 million workers and their families.
People should not suffer a large, permanent decline in their social security benefits just because they are 60 years old, disabled or experiencing the loss of a breadwinner at the start of a deep recession.
Paul Van de Water
Without the solution, preferably in the next Coronavirus Relief Bill, "social security benefits for workers who will turn 60 this year and who are entitled to early retirement benefits in 2022 will be significantly lower," wrote Paul Van de Water of the Center on Budget and Political priorities in the last siren call about the situation. "Those who are entitled to disability benefits or young survivors in 2022 will also receive lower benefits."
The earliest indication of the problem appears to have come from business journalist Brenton Smith on the FedSmith.com website, who raised the alarm on March 27.
Conservative commentator Andrew Biggs, a former social security official, followed in April with an article published by the University of Pennsylvania Wharton School and in May with a warning in the Wall Street Journal.
As Biggs calculated, the breakdown of retirees with average lifetime earnings could cost around $ 3,900 a year in benefits until the end of their days. This is more than 20% of today's average annual social security benefit.
Based on his own assumptions, Biggs estimates the gap at around 13% of what the Social Security Trustees report predicts for 2019 workers born in 1960 who will turn 60 this year. In any case, it is a remarkable success.
Biggs did a valuable service by raising the alarm, although his proposed fix is ​​not supported by many in the social security lawyers' community. More on that in a moment.
The problem is basically technical. Here's a simple (I hope) explanation.
Social security benefits are calculated based on the average career income of an employee and give the so-called average indexed monthly income. As Van de Water explains, workers' incomes up to the age of 59 are adjusted using an "average wage index" to take into account the growth in aggregate wages.
Under normal conditions, this is the right way to set benefits: they are adjusted higher as average wages rise, and as wages tend to rise about 1% a year faster than prices over time, benefits can be long-term economic Reflect progress.
The problem arises when total wages fall sharply. This is probably a result of the months-long economic blockade caused by the corona virus and the remaining layoffs and vacation days until the end of the year. Van de Water expects average wages to drop by at least 5% in 2020; Biggs bases its calculation on a 15% decrease.
As Biggs explains succinctly, a fall in national average wages this year relates to the year in which workers turn 60. "A fall in national average wages this year will reduce the indexed level of social security for all of his past earnings. This will result in a lower calculation of career average income and thus lower social income." Security advantage. "The deficit affects the lifelong performance of the worker.
This situation is obviously unfair to anyone who turns 60 this year. What to do?
Biggs suggests completely eliminating wage indexing and replacing an inflation index (that is, based on price increases instead of wage increases) in conjunction with some other formula adjustments.
This is uncomfortable for social security advocates who value wage indexing because it helps to maintain the equality of benefits and therefore the relevance of social security to newly retired workers, and because wage disruption is rare.
However, the current problem resulting from exceptional conditions is not unprecedented. Smith notes that this last happened in the recession year of 2009, when average wages did not rise by more than 4%, as expected by the social security agency, but by 1.5%. Workers who were born in 1949 and turned 60 in 2009 "paid a high price for their services," which could be $ 100 a month or more, writes Smith.
Van de Water and other social security experts suggest a simpler solution to the problem: let Congress dictate that wage index changes can never result in lower benefits than last year.
There are two precedents for this. The maximum annual income that is subject to social security wage tax never drops even with falling wages (this year it's $ 137,700 compared to $ 132,900 a year earlier).
And adjustments in cost of living to annual benefits can never lead to lower benefits year after year, even if the consumer price index on which they are based decreases.
This is the best option for Congress and should be included in the next Coronavirus bill so that the problem is not neglected. The retirement benefits of millions of Americans are at stake.
Social security, Franklin Roosevelt noted at the time of its inception, was designed to help Americans face the "dangers and vicissitudes of life".
This sentence aptly defines the current economic landscape. Van de Water writes: "People should not suffer a large, permanent decline in their social security benefits just because they are 60 years old, disabled or experiencing the loss of a breadwinner at the start of a deep recession."

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