When it comes down to Social Security, many Americans are in a state of panic as a result of the coronavirus pandemic. As the unemployment rate in the United States has fluctuated a lot this year since the start of the pandemic in March, we have seen a huge jump in individuals claiming their Social Security benefits early, meaning they are claiming earlier than their full retirement age. Keep reading to learn the consequences of the pandemic on Social Security benefits.
As mentioned above, the number of Americans claiming unemployment has grown since the start of the pandemic, at approximately 22 million individuals having filed. What this entails is that payroll taxes have decreased, meaning that the Social Security Administration will continue to withdraw from its trust funds “to avoid reducing benefits” (Brockman).
In addition, many pre-retirees that were planning to withdraw benefits closer to, if not at, their full retirement age could be encouraged to withdraw earlier than they had originally planned. If more seniors and pre-retirees are losing their jobs, they will have no choice other than to withdraw early, which in turn, ends up reducing the amount you receive. To calculate your full retirement age, visit here.
Your future benefits will be affected as well. According to Katie Brockman, “Your monthly checks are calculated based on the 35 highest-earning years of your career, so if you spend a significant amount of time unemployed or are forced to retire early because of COVID-19, you are lowering your earnings potential and hurting those calculations,” (Brockman). What this means is that your checks may be even smaller than they should be even if it was the highest-paying 35 years of your career.
For those planning to retire, retirement planning may look a lot different moving forward as a result of the COVID-19 pandemic. Relying entirely on Social Security benefits is not a good way to plan out retirement, as you just will not have enough to get you by, especially if benefits are significantly decreasing. In order to plan your retirement the right way, you need to make sure you are actively aware of your plan, your goals, and your current financial standpoint.
There are numerous new additions to retirement be aware of when it comes to any kind of financial planning these days. As the White House has passed different acts and rules related to working, paying loans, and other financial duties, it is key to stay on top of them when planning for your financial future. Heritage Wealth Management is happy to guide you through your planning, whether it be for retirement, your estate, or even advice for what to do Social Security-wise. Give us a call at 800.620.9330 to get started.