Social Security Shocker: Pandemic to Reduce Benefits by 9% for Americans Turning 60 in 2020
When you file for Social Security, the amount you receive may be lower.

If you are turning 60 in 2020, the pandemic could do more than interrupt your party plans. It could also lower the amount you’ll receive when you file for Social Security.
Social Security benefits are based on a worker’s 35 highest years of earnings, which are then indexed to the growth in average wages until the year the worker turns 60. That’s a problem for people who turn 60 this year—even if their own earnings were unaffected by the pandemic—because the economic downturn is expected to sharply reduce average wages, dragging down the index. Based on Congressional Budget Office projections, benefits for people who turn 60 in 2020 will be permanently reduced by about 9%, says Andrew Biggs, resident scholar at the American Enterprise Institute and former deputy commissioner of the Social Security Administration. For an average wage earner who claims Social Security benefits at age 67—full retirement age for people born in 1960—that works out to a reduction of about $2,500 a year, Biggs says. The Center for American Progress estimates that this will affect about 3 million people who will turn 60 this year.
Retirees can offset some of the damage by delaying benefits. For every year you delay benefits past full retirement age until age 70, you’ll receive a credit of about 8%.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
How Social Security Benefits Are Calculated
To be eligible for Social Security benefits, you must earn at least 40 "credits." You can earn up to four credits a year, so it takes ten years of work to qualify for Social Security. In 2020 you must earn $1,410 to get one Social Security work credit and $5,640 to get the maximum four credits for the year.
Your benefit is based on the 35 years in which you earned the most money. If you have fewer than 35 years of earnings, each year with no earnings will be factored in at zero. You can increase your benefit by replacing those zero years, say, by working longer, even if it's just part-time. But don't worry -- no low-earning year will replace a higher-earning year. The benefit isn't based on 35 consecutive years of work, but the highest-earning 35 years. So if you decide to phase into retirement by going part-time, you won't affect your benefit at all if you have 35 years of higher earnings. But if you make more money, your benefit will be adjusted upward, even if you are still working while taking your benefit.
There is a maximum benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2020, the maximum monthly benefit is $3,790. You can estimate your own benefit by using Social Security's online Retirement Estimator.
Social Security Cost-of-Living Adjustments
In less-dark times, one of the most attractive features of Social Security benefits is that every year the government adjusts the benefit for inflation. Known as a cost-of-living adjustment, or COLA, this inflation protection can help you keep up with rising living expenses during retirement. The COLA, which is automatic, is quite valuable; buying inflation protection on a private annuity can cost a pretty penny.
Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. For 2021, Kiplinger is projecting there will be no Social Security cost of living adjustment, thanks to the economic fallout of the worldwide pandemic.

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.
-
-
Should I Trade Stocks or Options?
Answering the question "should I trade stocks or options" will depend on your own risk tolerance, investing objectives and understanding of market dynamics.
By Jared Hoffmann Published
-
This Is How You Can Be a Snowbird in Retirement
There’s a lot to consider, and warm weather shouldn’t be the only deciding factor. For instance, will you rent or buy? What’s the tax and health care situation?
By Tony Drake, CFP®, Investment Advisor Representative Published
-
Retirees, It's Not Too Late to Buy Life Insurance
life insurance Improvements in underwriting have made it easier to qualify for life insurance, which can be a useful estate-planning tool.
By David Rodeck Published
-
Best Banks for Retirees
banking Kiplinger's 2023 list of the best banks for retirees.
By Lisa Gerstner Published
-
As the Market Falls, New Retirees Need a Plan
retirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
By David Rodeck Published
-
Retirees: Your Next Companion May Be a Robot
happy retirement Robots may help fill the gap left by a shortage of humans to help older adults live independently.
By Alina Tugend Published
-
Using Your 401(k) to Delay Getting Social Security and Increase Payments
retirement Your 401(k) can be a bridge from retirement to higher monthly income.
By Elaine Silvestrini Published
-
How Do I Stop Robocalls From Scamming Me?
retirement The scammers have automated their efforts to separate you from your money. We have ways to make it stop.
By Elaine Silvestrini Published
-
A Kiplinger-ATHENE Poll: Retirees Are Worried About Money
Making Your Money Last Concerns about recession, inflation and health care costs weigh on retirees and near retirees.
By the editors of Kiplinger's Personal Finance Published
-
Grandparent Scams Get Victims in Their Hearts
Scams If you get a call from someone who claims to be your grandchild in trouble and needing money right away, be wary. Don’t send any money or give any information until you verify the story.
By Elaine Silvestrini Published