The Social Security Calculator Helps You Know How Benefit Cuts Affect You

Many Americans are pessimistic about the future of Social Security, and the pandemic has made that even worse.

According to the Nationwide Retirement Institute, a recent survey found that 59% of people are now more worried about lack of Social Security funding than they were before Covid-19 struck.

And it’s changing their outlook on when to claim their Social Security retirement benefits, one of the biggest decisions they’ll ever make in their lives.

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Nearly one in five survey respondents, or 19%, said Covid-19 has changed their plans to apply for social security benefits, with 9% planning to apply early and 11% planning to delay applying. It’s a schedule.

Meanwhile, 42% of respondents plan to apply for Social Security benefits early while continuing to work, up from 36% who said the same in 2021.

But the recent Social Security Commission annual report, which first considered the impact of the pandemic, struck a somewhat optimistic tone. The report predicts a new depletion of program funding in 2035, a year later than predicted in 2021. Assuming Congress takes no action in the meantime, 80% of the benefits will be paid at that point.

The depletion date of the fund dedicated to retirement benefits (Old Age and Survivors Insurance Trust Fund) has also been postponed by one year to 2034, at which time 77% of benefits will be paid.

A reputable Social Security calculator may help you find out how much your retirement benefits will be reduced.

Covisum, a social security claims software provider, recently updated its calculators to reflect the Social Security Board’s latest forecasts. This includes a free version for consumers and a more complex paid version for financial advisors.

Another product, Maximize My Social Security, for a $40 annual fee, allows consumers to rate which billing strategy works best for them. There is also a separate version for financial advisors.

The free Covisum calculator makes it easy for individuals to calculate based on their benefits only and a few key facts (date of birth, retirement age benefit amount, benefit percentage, year the benefit amount was reduced) I can do it.

For example, for people who will reach full retirement age this year, you can calculate the impact of a 23% reduction in benefits from 2034 and the impact of no reduction in benefits. For each scenario, calculators indicate the value to claim at either age 65 or age 70, and when a beneficiary can obtain the maximum amount possible from the program. As beneficiaries live longer, the value of waiting until age 70 to claim increases. This is shown in the difference in total benefits calculated by the tool.

According to Covisum founder and president Joe Elsasser, the free calculator is certainly just a starting point for understanding the trade-offs in making a Social Security claim.

With thousands of Social Security claim rules, a more detailed analysis can help identify the best way to get the most out of the program in your unique situation.

For example, married couples need to adjust their benefit choices, Elsasser stressed.

“Couples should make decisions together, because at the first death, the smaller benefit goes away, followed by the larger one,” Elsasser said.

It’s also important to remember that the Social Security Board revise its projections each year, so current projections for depletion dates are subject to change.

Additionally, Congressional legislation could change the funding status of the program by that date. This may include increasing taxes, reducing benefits, or a combination of both. Democrats in Washington have submitted a proposal calling for higher taxes on the wealthy while providing more generous benefits.

Elsasser isn’t necessarily telling customers to plan for benefit cuts, but measuring the potential impact is important.

“There have always been compromises in the past, so it’s a good idea to plan under the current rules,” he said. Are you okay with it? If it’s reduced, what are our plans?’

If the results are unacceptable, it may be time to make changes such as spending less, saving more, or working longer to ensure you can weather these possible cuts.