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Taking a Fresh Glimpse into How the Pandemic Affects Social Security

Published on: Apr 15 2021

The COVID-19 pandemic caused more people to retire early than the number of people that it forced to delay retirement.

That reality is going to cause the retirement trust fund to run out of money faster than previously expected. More than 3.1 million Americans aged 55 or older plan to apply for their Social Security retirement benefits earlier than they initially planned because of the pandemic, according to the Household Pulse Survey conducted by the Census Bureau.

Those early retirees are partly offset by the 1.4 million people in the same age group who said they will work longer because of the pandemic, according to the survey. But that’s a net 1.7 million people who will claim benefits earlier than planned.

The survey broke down the results for the country’s 15 largest metropolitan areas. In New York, a net 300,000 people expect to claim Social Security early. No other metro area approaches that number. The closest is Philadelphia, which has a net 85,000 people planning to accelerate their benefit claims.

The bottom line is that, due to the pandemic, the Social Security Administration is likely to be paying benefits earlier than it otherwise would have to a substantial number of Americans. That will cause the retirement trust fund to run out of money faster than was estimated in the last annual report, which was issued in April 2020.

The 2021 Annual Report from the Trustees of Social Security is likely to be issued soon. It will give us more details of how badly the retirement trust fund was damaged by the pandemic.

The report will likely estimate that the retirement trust fund will run out of money several years before 2034, which was the date estimated in last year’s report. That should stimulate Congress to begin planning how to make up for the shortfall before across-the-board benefit cuts of 20% to 25% are triggered.

New Case Shows Why Wills Should be Written and Written Clearly

An extraordinary court case from Oklahoma shows the importance of having a will that is in writing and clearly written.

A man passed away and was survived by his two adult children and a grandson.

He left a one-sentence handwritten will (known as a holographic will) that left everything he owned to his grandson.

The adult daughter was appointed Special Administrator of the estate by the probate court.

Before the daughter could file her petitions with the probate court, the grandson filed the holographic will for probate, asking that the estate be distributed according to the will.

The grandson had a good case for claiming that the holographic will represented his grandfather’s intentions. The deceased’s adult son had shot his father once. The father sustained injuries that plagued him for life. The adult daughter had a history of being financially irresponsible and had damaged her father’s property over the years.

The grandson won the case in the trial court and the appeals court.

But the Oklahoma Supreme Court ruled against the grandson. The court said for the two children to be disinherited, the will had to expressly mention them and state that it was the father’s express intention to leave them with nothing from his estate.

Instead, the will did not even mention the two adult children.

While many people would conclude that failing to mention the two children is an indication that the father didn’t want to leave them anything, the law in most states disagrees.

To disinherit someone who would inherit under the law if there wasn’t a will and who most people would expect to inherit something, you have to specifically name the person and state that he or she is being disinherited. You do not have to explain why, even though that is helpful in case the will is contested. An alternative is to leave the person a relatively small inheritance, which makes it clear that you did not forget about him or her.

Most People Fail the Social Security Quiz, Reducing Their Lifetime Income

Most pre-retirees (ages 55 to 65) don’t know enough about Social Security to pass a quiz on its basic features.

A quiz with 12 true-false questions on Social Security retirement benefits was administered to pre-retirees in a survey by MassMutual.

Only 3% answered all questions correctly. MassMutual said 35% received a failing grade and another 18% earned Ds.

There were some bright spots in the results. About 94% knew that claiming retirement benefits before the full retirement age meant that the benefits would be reduced. Also, 86% knew that if they continued to work while receiving Social Security benefits before the full retirement age, their benefits could be reduced.

The topics that confounded most respondents are those that often are critical, especially concerning the impact of divorce or the death of a spouse on benefits. That’s not surprising, because studies by the Inspector General for Social Security have found that the Social Security Administration often shortchanges beneficiaries in those situations.

One question was tricky. Under current law, Social Security benefits could be reduced for everyone in 2035.

This is true, because the most recent estimate from the Social Security trustees projects the retirement trust fund will run out of money sometime in 2034. Payroll taxes will be enough to pay for 75% to 80% of benefits. If Congress doesn’t act, the Social Security Administration is required to reduce all benefits proportionately by the amount of the shortfall when the trust fund runs out of money.

The survey shows that it’s a good idea to have a copy of my book, Where’s My Money: Secrets to Getting the Most out of Your Social Security.

The Data

Retail sales increased by 9.8% in March from February’s level. That’s the largest monthly gain since May 2020, when many of the restrictions that were ordered last March and April began to be relaxed.

The largest sales increases were in restaurants, bars, clothing, electronics and sporting goods. The sharp increase in gasoline prices also increased sales.

But, excluding sales of vehicles and gas, retail sales still climbed 8.2% in March.

Economists were expecting a significant increase in retail sales because of the latest stimulus checks, wider vaccine administration and warmer weather. But, the consensus forecast was for an increase of less than 6%, so the results far exceeded expectations.

New unemployment claims in the latest week were 576,000. That’s a sharp decline from 769,000 the previous week and the lowest level since March 2020.

About 16.9 million people were receiving some form of unemployment benefits. That’s down substantially from 18.2 million a week earlier.

We’re seeing the first signs of rising inflation. In fact, the Producer Price Index (PPI) increased 1.0% in March, after a 0.5% increase in February and a 1.3% increase in January.

Over 12 months, the PPI increased 4.2%, the largest 12-month jump since September 2011. Excluding food, energy, and trade services, the PPI increased 0.6% in March and 3.1% over 12 months.

The report said “final demand goods” accounted for about 60% of the March PPI increase, and much of that was attributed to the increase in energy prices.

The Consumer Price Index (CPI) increased 0.6% in March following a 0.4% rise in February. The CPI increased 2.6% over 12 months.

That’s the highest 12-month gain since August 2018. About half the gain was the result of a 9% increase in energy prices for the month.

Excluding food and energy, the CPI increased 0.3% in March and 1.6% over 12 months.

The Small Business Optimism Index from the National Federation of Independent Business (NFIB) increased to 98.2 in March from 95.8 in February. The index still is well below the highs of around 110 recorded in 2018.

The business owners reported that filling job openings is their top problem today. A record number of business owners said jobs are hard to fill.

The Philadelphia Fed Manufacturing Index declined a little in April to 50.2 from 51.8 in March. The March level was a 50-year high for the index.

The Empire State Manufacturing Index for April was 26.3, a substantial increase from 17.4 in March.

Industrial Production bounced back, increasing 1.4% in March, compared to a revised 2.6% decline in February. Much of February’s decline is attributed to the power shutdown in Texas during the month’s storms.

The manufacturing component increased 2.7% in March, which is much better than the 3.7% decline in February. But, it is well below the 3.6% increase in manufacturing production most economists were expecting.

Home builder optimism remains steady. The Housing Market Index from the National Association of Home Builders (NAHB) was 83 in April, compared to 82 in March.

The home builders reported that demand for new homes remains strong. But, builders must contend with higher prices and supply shortages. There also is an inadequate inventory of homes and building lots for sale. Rising interest rates and prices also pose problems for potential buyers.

The Markets

The S&P 500 rose 1.20% for the week ended with Wednesday’s close. The Dow Jones Industrial Average gained 0.95%. The Russell 2000 increased 1.19%. The All-Country World Index (excluding U.S. stocks) added 0.82%. Emerging market equities edged up 0.28%.

Long-term treasuries rose 0.85% for the week. Investment-grade bonds increased 0.44%. Treasury Inflation-Protected Securities (TIPS) added 0.39%. High-yield bonds declined 0.11%.

The dollar fell 0.88%.

Energy-based commodities increased 3.35%. Broader-based commodities rose 2.74%. Gold was unchanged for the week.

Bob’s News & Updates

My latest book is “Where’s My Money: Secrets to Getting the Most out of Your Social Security.” It tells you clearly what your benefit options are in different situations and how to determine the best choice for you. You can find it on amazon.com or Regnery.com.

The number of regular viewers for my Retirement Watch Spotlight Series continues to increase. You should sign up because I make in-depth presentations of key retirement finance topics. You can watch these online seminars from the comfort of your home or office at times you choose. To learn more about my new Spotlight Seriesclick here.

A recent five-star review of my book on amazon.com said, “A complete retirement guide! One of the best books on this topic!” Click for more details about the revised edition of “The New Rules of Retirement.”

If you’re interested in my books, check my amazon.com author’s page.

I’m a senior contributor to the Forbes.com blog. You can view my contributor page here.

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