What You Need to Know about Social Security in a Pandemic and Recession
Social Security benefits play an important role in retirement security, and they are being impacted by current events in several ways.


The three-legged stool of retirement planning is the idea that Social Security, your personal savings and a pension or employer-sponsored 401(k) should work together to give you a stable retirement. However, none of these is expected to work on its own. Social Security is only designed to replace about 40% of your income. The average benefit in 2020 is about $18,000 a year, which isn’t enough for most retirees to make ends meet.
This is why you cannot rely on Social Security alone to get you through your golden years, and it’s important to come up with a strategy on when to take your benefits before you retire. A claiming strategy is especially important for those in their 60s right now as current events may impact benefits.
How the Pandemic and Recession Are Affecting Social Security Benefits
We’re only a few months into our current recession, but it’s already impacting Social Security benefits; new numbers show benefits for those who turn 60 this year will be permanently reduced by about 9%. About 3 million people will turn 60 in 2020, and if you’re an average earner who will wait to claim Social Security until full retirement age, your benefits will be reduced by about $2,500 a year.

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.
Even prior to the COVID-19 pandemic and recession, Social Security was facing a funding shortfall. The government program is expected to begin tapping into its trust funds this year, and benefits are projected to be reduced starting in 2035. However, our current economic instability has some predicting that Social Security’s trust funds could run out as soon as 2032 or 2028. That’s because record unemployment means payroll taxes are down, and that’s a big source of Social Security’s funding.
The Impact of the Election on Social Security’s Future
Speaking of payroll taxes, President Trump has said he wants to eliminate payroll taxes if he wins a second term in the White House. At the same time, he signed an executive order deferring payroll taxes starting Sept. 1 through the end of the year. That’s a problem for Social Security, because 89% of its funding comes from payroll taxes.
On the other hand, Democratic nominee Joe Biden says he plans to expand Social Security by increasing benefit payments if he wins the election. To do so, he wants more income from high earners to be subject to payroll taxes. In 2020, wages above $137,700 are not subject to the payroll tax. Biden’s plan calls for earnings over $400,000 to be subject to the tax.
No matter who wins in November, the upcoming election will likely impact Social Security’s future in some way. Lawmakers will be tapped to find a solution to the program’s funding shortfall sooner than later. While one option is to increase the payroll tax rate, another option is to raise the full retirement age once again. This was done in the early 1980s, boosting the full retirement age to a peak of 67 for those born in 1960 and later, which may encourage more retirees to wait longer to claim benefits.
The Impact of Inflation on Social Security Payments
Social Security recipients eagerly await an announcement on the COLA, or cost of living adjustment, each October. This year's COLA announcement was on Oct. 13, and it was just about what was expected: Social Security benefits will increase by 1.3% in 2021, the smallest increase since 2017. Because inflation had fluctuated so much in 2020, many had wondered whether Social Security checks would get a boost at all. As it is, this increase will raise the average monthly benefit check for 2021 by just $20 to $1,543.
The government program will be around in some form in the future, but we don’t know exactly what that looks like. This is why Social Security is part of the plans financial advisers like me create, but you cannot and should not rely on it for a majority of your retirement income. Your retirement security rests on how much you save during your working years and the plan you create for your nest egg.
Meet with a financial adviser when you are five to 10 years away from retirement to create a comprehensive income plan. An adviser will walk you through each step of the planning process to ensure you understand all the moving parts. Education is key to retiring with confidence.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Tony Drake is a CERTIFIED FINANCIAL PLANNER™ and the founder and CEO of Drake & Associates in Waukesha, Wis. Tony is an Investment Adviser Representative and has helped clients prepare for retirement for more than a decade. He hosts The Retirement Ready Radio Show on WTMJ Radio each week and is featured regularly on TV stations in Milwaukee. Tony is passionate about building strong relationships with his clients so he can help them build a strong plan for their retirement.
-
Ten Cheapest Places to Live in Texas
Property Tax Looking for a cheap place to live in Texas? Look no further. These counties have the lowest property tax bills in the Lone Star State.
-
AI Is Missing the Wisdom of Older Adults: What It Means for You
AI will increasingly affect your healthcare and finances, but young workers are primarily designing the systems and getting most of the jobs.
-
The Three C's to Financial Success: A Financial Planner's Guide to Build Wealth
Consistency, commitment and confidence in your chosen strategy are more critical to your financial success than finding the 'perfect' financial plan.
-
A Financial Adviser's Guide to Solving Your Retirement Puzzle: Five Key Pieces
If retirement's a puzzle you're struggling with, try answering these five questions. The answers will guide you toward a solution.
-
You're Close to Retirement and Cashed Out: How Do You Get Back In?
If you've been scared into an all-cash position, it's wise to consider reinvesting your money in the markets. Here's how a financial planner recommends you can get back in the saddle.
-
After the Disaster: An Expert's Guide to Deciding Whether to Rebuild or Relocate
Homeowners hit by disaster must weigh the emotional desire to rebuild against the financial realities of insurance coverage, unexpected costs and future risk.
-
A Financial Expert's Tips for Lending Money to Family and Friends
What starts as a lifeline can turn into a minefield if the borrower ghosts the lender. Following these three steps can help you avoid family feuds over funds.
-
What the HECM? Combine It With a QLAC and See What Happens
Combining a reverse mortgage known as a HECM with a QLAC (qualifying longevity annuity contract) can provide longevity protection, tax savings and liquidity for unplanned expenses.
-
721 UPREIT DSTs: Real Estate Investing Expert Explores the Hidden Risks
Potential investors need to understand the crucial distinction between a REIT's option to buy a Delaware statutory trust's property and its obligation.
-
I'm an Insurance Expert: Yes, You Need Life Insurance Even if the Kids Are Grown and the House Is Paid Off
Life insurance isn't about you. It's about providing for loved ones and covering expenses after you're gone. Here are five key reasons to have it.