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<< Older News  |  January 23, 2021


All News > Social Security

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Editor's Pick How Social Security Benefits Are Calculated
Congressional Research Service [CRS] Link to more items from this source
Jan. 20, 2021

29 pages. "The computation process involves three main steps: [1] First, a summarized measure of lifetime Social Security-covered earnings is computed ... called the average indexed monthly earnings (AIME). [2] Second, a progressive benefit formula is applied to the AIME to compute the primary insurance amount (PIA).... [3] Third, an adjustment may be made based on the age at which a beneficiary chooses to begin receiving benefits." [R46658 Jan. 19, 2021]

Tags: Social Security

Improving the Measurement of Retirement Income of the Aged Population
Office of Retirement and Disability Policy, Social Security Administration [SSA] Link to more items from this source
Jan. 12, 2021

"[F]or the population aged 65 or older, supplementing the CPS ASEC with IRS and Social Security administrative data results in a higher estimate of pension income's share of aggregate income, less estimated reliance on Social Security, and a lower estimated rate of poverty.... [The authors] find that the [2016 Health and Retirement Study (HRS)] provides better estimates of the income of the aged population than the public-use [2016 Current Population Survey (CPS)] data."

Tags: Retirement Plan Design  •  Social Security

The Social Security Retirement Age (PDF)
Congressional Research Service [CRS] Link to more items from this source
Jan. 8, 2021

28 pages. "Some lawmakers have called for increasing the Social Security retirement age in response to the system's projected financial imbalance, citing gains in life expectancy for the population overall. Other lawmakers, however, express concern that increasing the retirement age would disproportionately affect certain groups within the population, citing differences in life expectancy by socioeconomic groups. Differential gains in life expectancy are important in the context of Social Security because the actuarial adjustments for claiming benefits before or after the full retirement age are based on average life expectancy. " [Report R44670, updated Jan. 8, 2021]

Tags: Social Security

How Should Future Social Security 'Reform' Affect Your 2021 Spending Budget?
Ken Steiner, FSA Retired, and Bobbie Kalben, FSA Retired Link to more items from this source
Dec. 7, 2020

"[F]uture Social Security reform may decrease the future benefits you receive from the system and/or increase your future taxes in some manner.... [C]onsider how future uncertain Social Security reform might affect your current spending budget. To help you do this, this post will discuss the estimated size of Social Security's financial problem and several ways you can [the authors'] Actuarial Budget Calculator workbooks to reflect the potential impact of future system reform in your current financial plan."

Tags: Misc. Distribution Issues  •  Retirement Plan Design  •  Retirement Plan Information for Employees  •  Social Security

Fixing Social Security for the Long Term
Urban Institute Link to more items from this source
Dec. 3, 2020

"Two competing Congressional proposals illustrate opposing strategies for eliminating [Social Security's] long-term financing gap. A plan from Representative John Larson (D-CT) achieves solvency by raising revenue; former representative Sam Johnson (R-TX) gets there by cutting costs. How would these proposals affect workers, beneficiaries, and the program's finances? To find out, we use DYNASIM4, the Urban Institute's dynamic microsimulation model, to project the effects of both plans over the next seven decades."

Tags: Social Security

Updated Baseline for Actuarial Status of the OASI and DI Trust Funds, Reflecting Pandemic and Recession Effects (PDF)
Chief Actuary, U.S. Social Security Administration [SSA] Link to more items from this source
Nov. 25, 2020

"[On] November 16 the Social Security Administration released publicly what is effectively an updated actuarial valuation by the Office of the Chief Actuary in the Agency Financial Report (AFR) for Fiscal Year 2020. This update accounts for the implications of the pandemic and the recession ... We will be using this updated baseline as an interim baseline starting now and until the issuance of the 2021 Trustees Report next year.... Table 1 attached provides a comparison of the projections of the actuarial status of the combined OASI and DI Trust Funds under the intermediate assumptions of the 2020 Trustees Report and those under the updated interim assumptions. Table 2 provides a comparison of the near-term assumptions under these two baselines."

Tags: Coronavirus (COVID-19)  •  Social Security

Assumptions Used to Evaluate Social Security’s Financial Condition (PDF)
American Academy of Actuaries Link to more items from this source
Nov. 24, 2020

18 pages. "This issue brief describes the assumptions that must be made in any actuarial projection of the Social Security program's finances and explains how different assumptions affect the projections. The issue brief cites the specific assumptions used in the 2019 Trustees Report, and in CBO's 2019 Long-Term Social Security Projections.... As of this writing, the effects of the COVID-19 pandemic have not been factored into the trustees' assumptions."

Tags: Social Security

Social Security Announces 1.3 Percent Benefit Increase for 2021
U.S. Social Security Administration [SSA] Link to more items from this source
[Official Guidance]
Oct. 13, 2020

"The 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2020.... [T]he maximum amount of earnings subject to the Social Security tax ... will increase to $142,800 from $137,700." [See also: Fact Sheet: 2021 Social Security Changes]

Tags: Social Security

Analysis of Benefit Estimates Shown in the Social Security Statement
U.S. Social Security Administration [SSA] Office of Retirement and Disability Policy Link to more items from this source
Oct. 7, 2020

"This paper documents a study ... of the accuracy of the current Statement estimation method, the current method's assumption that 2 years of zero earnings predict no future earnings, and the accuracy of potential alternative methods of projecting earnings and benefits. Using administrative data from the Continuous Work History Sample, the paper finds that the Statement's current estimation method performs as well as or better than any of the other methods tested. The paper concludes with recommendations for the Social Security Statement." [Briefing Paper No. 2020-01]

Tags: Retirement Plan Policy  •  Social Security

Caution: Salary Splitting by the Self-Employed Can Reduce Couples' Social Security
Nerd's Eye View Link to more items from this source
Oct. 7, 2020

"A business owner who is married may have the flexibility to hire their spouse and 'transfer' a portion of their salary between themselves and their spouses (assuming that the spouse actually provides services to the company to earn a salary in the first place). While this can serve to increase the couple's combined retirement benefits, it often results in lower combined overall Social Security benefits for the couple!"

Tags: Social Security

Social Security Reform: Keeping It Solvent and Provide a More Equitable System
Steven Tanimura, via SSRN Link to more items from this source
Sept. 18, 2020

"[This paper's] primary objective is to highlight the more salient aspects of the issues surrounding Social Security with respect to its primary goal of attaining solvency. A secondary objective is to determine if Social Security can be made more equitable.... Two proposals ... [highlight] aspects of how it may be possible to secure long-term solvency for the program, as well as possibly providing a more equitable solution to those who participate in the labor market."

Tags: Social Security

Social Security: Minimum Benefits (PDF)
Congressional Research Service [CRS] Link to more items from this source
Sept. 11, 2020

31 pages. "Some recent proposals would redesign the minimum benefit.... However, some have suggested [allowing] the minimum benefit to phase out, arguing that the provision does not accurately target the working poor ... Increases in Social Security benefits targeted at lifetime low earners could be implemented in various ways. " [Report R43615, updated Sep. 10, 2020]

Tags: Social Security

Social Security: Potential Effect of Raising or Eliminating the Taxable Earnings Base (PDF)
Congressional Research Service [CRS] Link to more items from this source
Sept. 3, 2020

30 pages. "[T]he Social Security Administration's Office of the Chief Actuary (OCACT) estimates that phasing in an increase in the taxable maximum (for both contributions and benefits bases) to cover 90% of covered earnings over the next decade would eliminate roughly 20% of the long-range shortfall in Social Security. OCACT's estimates also show that if all earnings were subject to the payroll tax, but the current-law base was retained for benefit calculations, the Social Security trust funds would remain solvent for over 40 years." [RL32896, updated Sept. 2, 2020]

Tags: Retirement Plan Policy  •  Social Security

2021 COLA: A Raise Likely for Social Security Recipients After All
Kiplinger Link to more items from this source
Aug. 25, 2020

"Summer rebounds in [gasoline, travel, and car insurance], as well as increases for in-demand items like used cars, meat and haircuts, have put the consumer price index back on a more normal trajectory ... The Kiplinger Letter is now forecasting a 1.2% increase in the 2021 COLA, which should be welcome news to retirees and others who receive Social Security benefits."

Tags: Social Security

Social Security COLA 2021: What to Know About Cost-of-Living Benefits
USA TODAY Link to more items from this source
Aug. 10, 2020

"The government won't officially announce the next COLA until October, but experts are predicting a small raise or none at all.... COLAs are based on increases in the CPI-W from the third quarter of the prior year to the corresponding quarter of the current year in which the COLA became effective.... Currently, the year-over-year increase in the CPI-W through the second quarter of 2020 is 0.15%."

Tags: Social Security

Social Security: Economic Growth and the Funding Shortfall
Congressional Research Service [CRS] Link to more items from this source
Aug. 7, 2020

27 pages. "This report presents the current status of the trust funds, projections for the factors in real economic growth, and how projections for these growth factors are estimated to affect the program's financial status.... The trustees' intermediate assumptions, their best estimates as to the program's future experience, suggest that low growth is contributing to the projected financial shortfall[.]" [R46479, Aug. 6, 2020]

Tags: Social Security

Social Security: What Happens If the Trust Funds Run Out? (PDF)
Congressional Research Service [CRS] Link to more items from this source
July 29, 2020

24 pages. "After depletion, the trust funds would continue to receive tax revenues, from which a majority of scheduled benefits could be paid. One option would be to pay full benefits on a delayed schedule; another would be to make timely but reduced payments.... Maintaining financial balance after trust fund insolvency would require substantial reductions in Social Security  benefits, substantial increases in tax revenues, or some combination of the two.... Trust-fund insolvency could be avoided if expenditures were reduced or receipts increased sufficiently." [RL33514, updated Jul. 29, 2020]

Tags: Social Security

Summary of Provisions That Would Change the Social Security Program (PDF)
Office of the Chief Actuary, U.S. Social Security Administration [SSA] Link to more items from this source
June 22, 2020

33 pages; Jun. 15, 2020. '[This paper] contains summaries of provisions that would change the Social Security Program, along with the resulting financial effects.... Following a brief description of each provision [are] two key indicators of the financial effect on the combined OASI and DI Trust Funds. The first, the change in the 75-year long-range actuarial balance, indicates the financial effect of the provision over the entire long-range (75-year) period. The second, the change in the annual balance as of the 75th year, gives an indication of the year-by-year expected gain or shortfall after the provision has been in place for a long period of time."

Tags: Social Security

GAO Report: BLS Should Explore Ways to Improve the Accuracy, Timeliness, and Relevance of Its Cost-of-Living Measurements
U.S. Government Accountability Office [GAO] Link to more items from this source
June 16, 2020

"Federal retirement programs often have [COLAs] to ensure benefits keep pace with inflation. This includes Social Security for more than 60 million older Americans, workers with disabilities, and their families. These COLAs are typically based on consumer price indexes for certain groups of Americans. [BLS] produces these indexes, but it hasn't evaluated whether its data accurately reflect what these groups pay, where they shop, and what they purchase. We recommended that BLS evaluate the data they use, as well as explore using other data, to improve its indexes." [GAO-20-422, Jun. 16, 2020]

Tags: Federal Government Plans  •  Social Security

Editor's Pick Retirement Beneficiaries Potentially Eligible for Widow(er)'s Benefits (PDF)
Office of Inspector General, Social Security Administration Link to more items from this source
June 10, 2020

18 pages. "Of the 100 retirement beneficiaries sampled, 69 were eligible for higher widow(er)'s benefits.... This occurred because SSA employees [1] did not always assess and take action when cases were alerted for possible payment increases, and/or [2] did not have processes to detect beneficiaries potentially eligible for higher widow(er)s benefits."

Tags: Social Security

Editor's Pick 401(k) Plan Sponsors Should Make Employees Aware of Age-Based Social Security Risk
Fiduciary News Link to more items from this source
June 9, 2020

"The Average Wage Index (AWI) for 2020 will ... be the AWI used to determine indexing on all applicable earnings for those born in 1960. The widespread layoffs and (corresponding decrease in annual wages) from the COVID-related recession means 2020 AWI is projected to go down for the first time since 2009 and for only the second time since 1951.... If the lower projection holds true, the reduction in 2020 AWI means every indexed year of earnings is reduced for those born in 1960 when compared to workers born in 1957, 1958, and 1959.  Are 401k plan sponsors doing enough to explain to employees the implications of Social Security and the impact it may have on its retirement assumptions?"

Tags: 401(k) Plans  •  Coronavirus (COVID-19)  •  Retirement Plan Design  •  Social Security

Changes Suggested by Actuaries Unlikely to Ensure Sustainable Solvency for Social Security
Ken Steiner, FSA Retired Link to more items from this source
May 27, 2020

"Whether intentional or not, ... the AAA is potentially understating the magnitude of the Social Security financial problem by utilizing the flawed 75-year actuarial balance measure rather than the stronger Sustainable Solvency measure.... [T]he Academy should recommend that Congress consider implementing automatic adjustments to System taxes/benefits as part of the next round of Social Security reform to maintain Sustainable Solvency and to truly improve public trust in the financial soundness of the program."

Tags: Social Security

Editor's Pick An Actuarial Perspective on the 2020 Social Security Trustees Report (PDF)
American Academy of Actuaries Link to more items from this source
May 22, 2020

14 pages. "The combined Social Security trust fund reserves are projected to become depleted during 2035, the same year as projected in last year's report. If changes to the program are not implemented before 2035, only 79 percent of scheduled benefits would be payable in 2035, declining to 73 percent by 2094. The actuarial deficit increased from 2.78% of taxable payroll to 3.21% of taxable payroll[.]"

Tags: Social Security

How Sticky Is Retirement Behavior in the U.S.? Responses to Changes in the Full Retirement Age
National Bureau of Economic Research [NBER]; purchase required for full document Link to more items from this source
May 18, 2020

"[W]hile increases in the FRA strongly and immediately shift claiming ages, retirement ages exhibit persistent 'stickiness' at the old FRA of 65. [The authors] use several strategies to explore the likely mechanisms behind the stickiness in retirement, [and] find suggestive evidence of a role for employers in individuals' responses to the FRA."

Tags: Retirement Plan Design  •  Social Security

Employment at Older Ages and Social Security Benefit Claiming, 1980-2018
Patrick J. Purcell, via SSRN Link to more items from this source
May 13, 2020

"[F]rom 2000 through 2018, the [labor force participation rate (LFPR)] among individuals aged 65-69 rose from 30 percent to 38 percent for men and from 19 percent to 29 percent for women. Since 2000, the proportion of fully insured men and women who claim retirement benefits at the earliest eligibility age of 62 has declined substantially."

Tags: Social Security

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