Heads They Win Tails You Lose
Many Social Security recipients will be happy if they get a COLA in 2021. However, the problem is that if food prices drive the COLA higher, it could end up costing those on Social Security more in extra expenses than they’d get from larger checks. Falling gasoline costs help younger workers in the middle of their careers more than they help older Americans, but everyone has to eat. If food costs rise at a faster pace than the overall inflation rate, then the COLA might be too little to help seniors keep up with their cost of living.
Energy prices are continuing to fall, with no clear relief in sight. That could still lead to a 0% Social Security COLA for 2021. But if food prices keep rising, then inflation at the dinner table could well deliver a positive COLA next year — even if it does nothing to benefit Social Security recipients in terms of their true purchase power.
Social Security Turns Most People Down
As anyone who’s been through the process will tell you, it isn’t easy to get Social Security disability benefits. Our survey backed up that general impression. Overall, only about four in ten of our readers were ultimately approved for benefits.
Of course, the outcome for your individual claim will depend on whether you meet the medical and other eligibility requirements. Still, many people who sincerely believe they’re too disabled to work aren’t able to get benefits. Are there certain characteristics or circumstances that make some claims more likely than others to be approved? Our survey confirmed what you might suspect: It’s easier to get benefits for some medical conditions than others . But the results also pointed to other, less-obvious factors that make a difference.
“Go to your doctors, do all they ask, and follow up with your specialists. Have witnesses who can speak to the limitations your health issues create. My attorney helped make the process smoother and less stressful.”
Cecilia, 47, California
Do I Qualify For The Full $1400 Amount Maybe More Or Less
As part of the new administration’s American Rescue Plan, people who receive SSI and SSDI will once again automatically qualify to receive a third stimulus check, for up to $1,400, as they did for the first and second round of payments approved in March and December 2020.
In the first two rounds, those individuals were eligible so long as they had a Social Security number and weren’t claimed as a dependent on someone else’s tax return — and so long as their household income didn’t exceed the threshold .
The most recent March stimulus package expands stimulus payment eligibility to dependents of all ages, including young adults ages 17 to 24 and older adult dependents. It also increases the amount set aside for those dependents to $1,400 each. Another change: This time around, the checks will be more “targeted” than in the first two rounds, meaning that single taxpayers who earn $75,000 or less per year will be eligible for the full amount, while those who earn more than $80,000 per year won’t get any money. That means some families could get more money, while others will get less or none at all.
People receiving Railroad Retirement and VA benefits also automatically qualify for a payment, as they did in the first and second round of stimulus checks, the IRS said.
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Maximum Taxable Earnings Rose To $142800
In 2020, employees were required to pay a 6.2% Social Security tax on income of up to $137,700. Any earnings above that amount were not subject to the tax. In 2021, the tax rate remains the same at 6.2% , but the income cap has increased to$142,800.
The flip side is that as the taxable maximum income increases, so does the maximum amount of earnings used by the SSA to calculate retirement benefits. In 2020, the maximum monthly Social Security benefit for a worker retiring at full retirement age was $3,011. In 2021, the maximum benefit increases by $137 per month to $3,148.
Social Security recipients can receive a 32% larger payment each month if they claim benefits at age 70 instead of at their regular full retirement age.
Say Goodbye To Over $90 Billion In Annual Program Revenue
Yet, there’s another issue not mentioned above.
Social Security has three means by which it generates revenue:
- Payroll taxes
- Interest income on its spare cash
- The federal taxation of benefits
Payroll tax helps funds Social Security at a rate of 12.4% of earned income between $0.01 and $127,200, although most workers only pay 6.2%, with their employer covering the other half. This maximum taxable income figure of $127,200 changes in step with the average wage index most years. In 2015, payroll taxes accounted for 86.4% of the $920.2 billion in revenue collected for Social Security.
The federal taxation of benefits amounted to about 3.4% of total revenue in 2015. Social Security recipients with incomes above $25,000 or joint filers with income above $32,000 are subject to having at least half of their benefits exposed to federal taxation.
The final 10.1% is comprised of interest income from its more than $2.8 trillion in spare cash. This cash is invested in special issue bonds designed for trusts and, to a far lesser extent, certificates of indebtedness. In 2015, nearly $93 billion in revenue was generated by this spare cash.
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Advocates Order An Extra Large Cola
Retirees say COVID has increased their financial pressures. In a new survey from The Senior Citizens League, over a third of seniors, 34%, say they’ve used up their emergency savings since March 2020.
About 1 in 5, 19%, report drawing down their retirement savings more than usual. The same percentage say they have visited a food pantry or applied for food stamps since the pandemic began.
The Senior Citizens League is calling on the Social Security Administration to take three big steps to better meet the increasing financial challenges faced by the elderly:
Provide a one-time, modest boost to all retirees, to help increase the buying power of their Social Security benefits.
Tie the annual inflation adjustment to a consumer price index that more accurately reflects the buying patterns of retired and disabled households, which tend to devote a bigger portion of their income to housing and medical expenses.
Provide a guaranteed minimum COLA of no less than 3%. “This would be especially important in years when there is deflation and the COLA drops below zero, as it has done three times in the past,” Johnson says.
It’s Not Easy To Get Ssdi Or Ssi But Our Survey Highlighted Several Factors That Can Increase Your Chances Of Being Approved For Benefits
How hard is it to get Social Security Disability Insurance or Supplemental Security Income benefits if you have a serious medical condition that makes it hard for you to work? We surveyed readers across the U.S. who recently went through the process of applying for SSDI or SSI to learn more about their experiences. Here’s what we learned about the outcome of their disability claims, as well as some of the things that made a difference in their chances of success.
The Purpose Of A Cola
The purpose of a COLA is to make sure that inflation doesn’t lead to your benefits being insufficient to purchase the things you need to live. For example, if one year the cost of goods and services were to cost twice as much on average as the year before, you would only be able to buy half as many goods and services with the same amount of money.
Congress Must Take Action To Improve Ssi
To summarize, SSI has two important strengths: 1) Its benefits go to some of the most marginalized members of society, and 2) it patches up serious holes in the Social Security system. SSI and Social Security are far more effective together than either program is by itself.
However, policymakers can still improve SSI in a number of ways. Although a more comprehensive set of reforms would include eliminating marriage penalties, removing limits on in-kind support, and modifying the program in other ways, this column recommends three concrete changes:
The damaging impact of the gross asset limit
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I Receive Social Security Benefits What Do I Need To Know About My Third Stimulus Payment
If you receive Social Security SSI or SSDI benefits, your check should have arrived or be on the way by now. Here are the details:
- Many who receive Social Security payments and most SSI and SSDI recipients and retired railroad workers will qualify to receive a stimulus check Tens of millions have already received theirs.
- You should have received your payment around April 7 if you have direct deposit set up or were sent a Direct Express card.
- Recipients of veterans’ benefits should have received their stimulus money on if they don’t usually file taxes.
- If you used the Non-Filers tool in 2020 and didn’t have a change in life circumstances, you may receive a check automatically as part of the ongoing stimulus payment batch. Going forward, your money could arrive as a paper check.
- You may also need to file a 2020 tax form to claim your dependents for the third stimulus check.
- The government says it will conduct outreach letting taxpayers know if they’re eligible for any funds and offering help if needed.
- Any missing payment amount from the third check may be paid out as part of tax season 2021 , a year from now. You’ll likely have to file a tax return to claim it, if the IRS follows the same pattern for missing stimulus check money as now .
- There’s no fourth stimulus check yet, but some are advocating for more direct payments to Americans.
Beneficiaries Have Received Cost
by John Waggoner, AARP, Updated October 13, 2021
En español | Every year, by law, Social Security recipients are eligible for a cost-of-living-adjustment . The increase in benefits is designed to help beneficiaries keep up with rising prices. Retired workers receive the annual COLA from the Social Security Administration , as do survivors, those getting Social Security Disability Income and recipients of Supplemental Security Income payments. Yet, while these beneficiaries are, indeed, eligible for COLA increases annually, the amount of the increase can vary greatly from year to year and there’s no guarantee of an increase in any given year.
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What This Plan Is About
Barely budging wages and rising costs have made it harder and harder to save for retirement. At the same time, Congress hasnât increased Social Security benefits for nearly 50 years.
But Elizabethâs got a plan to protect and expand Social Security benefits for all of us.
Thatâs why this plan:
- Increases standard Social Security and Social Security Disability Insurance benefits immediately by $200 a month â $2,400 a year â for every current and future beneficiary in America.
- Changes out-of-date Social Security rules to improve benefits for lower-income families, women, people of color, people with disabilities, and public-sector workers.
- Values the work of caregivers by creating a new credit for people who take time out of the workforce to care for a family member â and recognizes caregiving for the valuable work it is.
- Extends Social Security benefits to full-time students until the age of 24 if theyâve got a parent who has a disability or has died.
- Helps people with disabilities build financial security and get the care they need by rewriting eligibility rules to stop punishing beneficiaries for returning to work and eliminating the 5-month Social Security Disability Insurance benefits waiting period and the 24-month Medicare waiting period.
Ssi Federal Payment Amounts For 2021
Maximum Federal Supplemental Security Income payment amounts increase with the cost-of-living increases that apply to Social Security benefits. The latest such increase, 1.3 percent, becomes effective January 2021.
SSI amounts for 2021 The monthly maximum Federal amounts for 2021 are $794 for an eligible individual, $1,191 for an eligible individual with an eligible spouse, and $397 for an essential person.
In general, monthly amounts for the next year are determined by increasing theunrounded annual amounts for the current year by the COLA effective for January of the next year. The new unrounded amounts are then each divided by 12 and the resulting amounts are rounded down to the next lower multiple of $1.
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There’s A Big Social Security Change That’s Just Three Years Away
But as many of you may have heard by now, Social Security is on a collision course with disaster. According to the Social Security Board of Trustees 2016 report, the Trust’s more than $2.8 billion in excess cash will be completely exhausted by 2034. Once this money is gone, the Trustees have estimated that across-the-board benefit cuts of as much as 21% may be needed to sustain payouts through the year 2090.
What you may not realize is that a big change that’ll precipitate this cash downfall is right around the corner. Beginning in 2020, per the Trustees’ estimates, Social Security will begin paying out more in benefits than it’s generating in revenue. In other words, the switch will officially be flipped, and the more than $2.8 trillion spare cash pile will begin to dwindle.
Why, you ask? There’s no one specific reason. Rather, it’s a confluence of factors that include:
- The ongoing retirement of baby boomers, which will lower the worker-to-beneficiary ratio
- Lengthening life expectancies, which allows people to claim benefits for an extended period of time
- The rich, who are living noticeably longer than lower-income folks and are able to draw a benefit payment for a longer period of time
- America’s poor saving habits, which coerce workers and seniors to be extra reliant on Social Security during retirement
Ways To Look At Social Security
People can apply up to four months before they want their Social Security retirement benefits to start. When theyre ready to apply for retirement benefits, they can use the online retirement application at SSA.gov.
In Michigan, there were nearly 1.54 million people receiving Social Security retirement benefits as of December 2020, the most recent information available.
Michigan’s state population as of April 1, 2020, was at 10,077,331 people.
So nearly 15% of the population receives Social Security retirement benefits.
Laurence Kotlikoff, professor of economics at Boston University, said he’s quite concerned that inflation will continue to be higher in the years ahead.
If inflation continues, he said, many people are better off waiting to take Social Security past age 62 so that they ensure a larger share of their old age income is inflation-protected.
“Inflation should make you more prone to being patient when taking Social Security,” said Kotlikoff, who is president of Economic Security Planning, which offers an online tool called “Maximize My Social Security” for $40 a year for individuals.
Kotlikoff said even without the concerns of inflation, waiting to take Social Security closer to age 70 is the “best move by a mile for roughly three quarters of households.”
He said the the inflation-adjusted benefit at 70 is 76% higher than at age 62.
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When Do You Get A Cola
Each year, the Bureau of Labor Statistics in the federal Department of Labor determines the Consumer Price Index . The CPI-W is a measure of the average change over time in the prices people pay for goods and services. The Social Security Administration uses the CPI-W to determine if there will be a COLA.
In order for there to be a COLA in a given year, the CPI-W from the third quarter in the last year that Social Security recipients were given a COLA is compared to the CPI-W from the third quarter of the current year. If the CPI-W has increased by less than 0.05%, or if the CPI-W actually decreased, there will be no COLA. If the CPI-W increased by at least 0.1%, there will be a COLA increase in January of the next year.
Ssi Reform Would Boost Incomes For Seniors And Disabled People
Eighty-six years ago last month, President Franklin D. Roosevelt signed the Social Security Act into law. Upon giving life to Americas most cherished safety net program, Roosevelt :
We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age. It is, in short, a law that will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness.
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