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Ask the Expert: Social Security
AARP Social Security experts Joel Eskovitz and Jim Palmieri will lead the conversation and answer your questions around Social Security benefits as part of our Savings and Planning Theme Month. Join us here to learn more about the expected cost of living adjustment (COLA) for 2022 and how AARP can help answer your top questions about Social Security benefits.
Please note: experts do not answer a Member’s personal questions, but offer insights and general guidance into best practices, tips, resources – including the AARP Social Security Resource Center.
Learn and Earn! Ask a question of our experts to earn 50 points awarded via code emailed to you after you participate (one entry per week given points). Ends October 25.
Another Question -
We all know that from changes made to preserve the SS system back in the 80's that the FRA is increasing and will hit the current FRA top of 67 in a few years (those born in 1960) .
However the early retirement age of 62 has not changed. So, every time somebody retires on SS at the legislated early age of 62, as the FRA increases, they are getting a smaller and smaller benefit because the benefit is reduced by the number of months to their FRA.
This won't officially change unless legislative changes are made. In fact, I am sure that it was part of the overall plan to save money. But people can do it on their own - by increasing their own "early" retirement age to -3 years earlier than their FRA.
Why is not more attention & notice made by senior advocacy groups and government disclosure to early SS retirees in regards to this mathematical shenanigans instilled by government? SS Retirees that take their early benefit at the minimum age eligible to collect are being bamboozled. Individuals can control this reduction by waiting a few years longer to take their early (SS minimum age to collect) benefit.
@GailL1 Your math skills are on point! As is the central idea that every year the full retirement age goes up, the penalty for claiming at 62 gets slightly higher. At AARP we have been messaging about the idea that "It Pays to Wait" and the increase in your benefits for every month you delay claiming. Other groups do that as well.
However, we are also aware that waiting beyond 62, even a few months, is not always a viable option for people. Those in poor health or those without any income streams (unemployment and/or a lack of retirement savings) may decide half a loaf is better than nothing, especially if their prospects of steady income are dwindling. You can check out this report we published this year showing who these early claimants are. In an ideal world, everyone would be able to wait until 70 and claim the maximum amount, but we know not everyone lives in an ideal world and that many factors go into these personal financial decisions.
I would like to read the actual RAND Report by authors, Philip Armour and David Knapp - from all the AARP.org Public Policy links in the various articles about this subject, I seem to be just going in circles on April 2021 articles.
My point in my post is that I think government needs to do a better job is education on Social Security benefits especially in this area where it can make a lot of $$$ difference. When we have financial dealing with private entities, there is an unlimited amount of disclosures that one has to understand and authorize. To my knowledge, there is no such disclosure when it comes to filing for Social Security retirement benefits - not even a statement, perhaps with some required acknowledgement initials, as to what amount one might be losing with this early filing action. Seems that would be a rather inexpensive and educating authorization.
One thing that the AARP.org Public Policy article mentioned was as one of the characteristics of early filers
Are more likely to live in rural areas
Immediately, I thought about where I live - and why this might be happening and the one thing I kept asking myself is now where is it easier to pick up "cash" jobs, meaning those that are taken under the table, so to speak. Rural areas, IMO.
Sometimes those who have have less education, on average (another one of the reasons mentioned) actually do have a retirement plan, perhaps somewhat unscrupulous.
Thank you for your response.
@GailL1 The two reports on our website were written by Armour and Knapp specially for the Public Policy Institute, so these are the actual papers, and are on our website. You can get to their first paper on the changing picture of who claims Social Security at 62 here. Here's a link to the second paper on the consequences of claiming at 62; if you prefer to wait for a journal version of the second paper, I believe it has been accepted for publication in the Journal of Pension Economics and Finance (although we don't know the issue).
Standing on concrete 8-10 hours a day in 120 degree heat, chest-thumping noise and choking fumes, robotically doing the same mind-numbing task a hundred times a day, day after day and month after month, carrying 90lbs of shingles up a ladder, tossing bales of hay onto a hay wagon on blazing hot summer days might be reasons people choose to file for their Social Security benefits before they reach full retirement age.
People who would like the equivalent of the old 25% reduction for receiving early benefits at age 62, need only delay the same number of months their FRA is past 66. So someone with a FRA of 66 years 6 months, could delay taking SS until 62 years, 6 months to receive a 25% reduction instead of the 27.5% reduction at 62. For age 67 FRA, start at age 63.
The reason the SSA may not push it is the 5% less payout . That goes along with what I have noticed about the SSA pushing taking a 6 month retroactive start date for people that waited past their FRA. The 6 month retroactive start date will save SS 4% for the life of the benefits payments.
@drlindamc The short answer is that in cases where inflation is virtually non-existent, the worst thing that can happen is that there is no COLA and your benefits are unchanged. That has happened a few times in recent years, most notably post-recession in 2009 and 2010 and again in 2015 (since established in 1975, those were the only three times that has happened; see here). So, yes, your total monthly benefits starting in January 2022 will always be that amount or higher going forward.
@JimLPalmieri thank you in advance for your helpful tips!
My question is I chose not to accept Medicare Part B when eligible in November on retirement (due to homelessness could not afford), planning on opting in for the next plan year.
I, unfortunately, missed the deadline.
I think I learned the penalties were very high (10% per month) if signing up after that? If that is true?
Thank you in advance!
Phil Harris, actor and showman, to John Fogerty of CCR: “If I’d known I’d live this long, I’d have taken better care of myself.”
If you were low income when you signed up for Medicare and were suppose to take Part B at that time, there would have been a Medicare Savings Program to help you out. All you would have had to do is apply.
- The QMB program helps pay Part A premiums, Part B premiums, and deductibles, coinsurance, and copayments for services and items Medicare covers.
- The SLMB Program is a state program that helps pay Part B premiums for people who have Part A and limited income and resources.
You can read thru the others to see which could have applied the best.
Who helped you in the sign up process?
Are you still paying the Part B Premium Penalty?
Hello @WebWiseWoman I'm very sorry to hear you missed the deadline due to homelessness. This is certainly a very difficult time for a lot of people, and I hope things are better for you now.
My expertise is in Social Security and not Medicare, so I think it's better I not give any advice on this. I was able to track down this from AARP, and this from Medicare that describe the penalty in more detail and hope you find them helpful. Good luck!
@Agolfer The COLA increase should really be thought of as applicable to current recipients in terms of adjusting how much they were receiving this past year versus next year. For new recipients, the cost of living is built in to the formula used to calculate your benefits. Without getting super technical, it is essentially already baked in whenever you would apply. So in terms of thinking about when to claim, the COLA should not play any role in your decision-making. What would make sense to consider, however, is that for every year you wait, you are essentially increasing the size of your benefit by about 8%. Additionally, if you wait to claim until at least your full retirement age, which is 66 and a few months, you may be helping your spouse -- if you are married. See here for your exact full retirement age and the impact on spousal benefits.
@cn8777 Good morning. The announcement on any change in the Medicare Part B monthly premium isn't expected until November, although early indications are that it will be around $10. Many Social Security beneficiaries will see increases in their monthly benefit well above this amount. It's certainly something to keep a close eye on. We'll know for sure in a few weeks.
I own a house with another person and bought another house on my own. He doesn't want to sell. He can't buy me out. If I quit claim deed I'll lose everything on the first house. I currently live $66 over the US poverty level. The approximately $77 increase will not cover increased med and pharmacy costs. What can I do. I currently don't qualify for "extra help?
Thank you for your post, @canebug It sounds like you're dealing with a difficult housing and legal situation right now -- something deeper than a question related to Social Security, which is the focus of this forum. Perhaps you might consider reaching out to a trusted financial advisor or attorney close to you for advice.
Excuse me for jumping in here but your question is either confusing perhaps based on your number of marriages, or who is the benefit owner or the spouse or you are confusing the GPO and the WEP.
A Social Security Government Pension Offset reduces spousal (widow or widower) Social Security retirement benefits in situations where this spouse did not pay Social Security taxes on their employment earnings (some or all) and they are getting a government pension in lieu of this.
So IF YOUR benefits have been reduced because of the GPO then YOU are the spouse and had earnings that weren't covered by the SS program during your working career AND in addition to your government pension, you are getting spousal (or widow or widowers) benefits from a spouse that had fully covered SS earnings - it is your spousal (or widow or widowers) benefit that is being reduced.
Now if you have an ex-spouse that qualifies for an ex-spouse SS benefit on your record, that calculation would be based on whatever SS benefits YOU have accrued on YOUR OWN work record - IF any since you are getting a spousal benefit that is being reduced by the GPO.
With Social Security rules, it helps to identify the type of benefit which you are talking about specifically. So who is the "someone" in your question - you ? Is your benefit being reduced by the GPO or the WEP? Cause the answer to your question would be different based on the type of reduction.
@g373896p, Social Security benefits are often reduced for people with work histories in “uncovered” employment (meaning they were employed in jobs where they did not pay Social Security taxes), and because of this work receive a pension from a public-sector government retirement system (typically from government employment at the state or local level). This reduction in Social Security benefits is known as the Windfall Elimination Provision, or WEP.
WEP causes a change in how the worker Primary Insurance Amount (PIA) is calculated (resulting in a lower PIA). Because dependent benefits are based on the PIA of the worker, the benefit for an ex-spouse is reduced. Note: for an ex-spouse to be eligible for spousal benefits, the marriage must have lasted at least 10 years.
Because the rules for WEP can be complicated, I recommend reaching out to Social Security if you want to find out the specific impact on benefits. If interested, this document explains WEP in greater detail.
I’m sorry I didn’t see this topic sooner. My reward is “I wake up in the morning, just glad my boots are on instead of empty in the whispering grasses down at forest lawn” … Bruce Springsteen.
I’d like to ask the expert’s 2 questions and if they only answer one that’s fine.
What do you think of the Trust Act of 2021?
What do you think of the present administration wanting those making $400,000 and up to pay FICA payroll taxes? Which would help to expand and strengthen the social security trust fund.
Thanks in advance for your answers to my questions.
Hi @ReTiReD51, I will tackle both of your questions, and not just because I too enjoy the Boss.
On the TRUST Act, AARP has been advocating against its passage (if you want to get involved, head over here). While we would like to see the program updated, we think the forum for that is in the open in the actual legislative committees that oversee the program. We have seen from past efforts that punting these decisions to closed-door commissions does not allow for public debate on the issues and can result in harsh benefit cuts.
In terms of subjecting people making in excess of $400,000 annually to the payroll tax (for 2022, people only pay payroll taxes on the first $147,000 of their wage income), we have not taken a formal stance there. We are certainly considering any option that would bring more money into the system to make it more financially stable for the long-term. One of the reasons people are looking at this approach is that we have seen a much larger increase in wage income above that cap. When the system was last updated in 1983, about 90 percent of all earnings were below the cap, but due to large growth in earnings for middle- and upper-income workers, the system is now only capturing 83 percent of all wages. If you want a more detailed explanation, check out this report we published last year.
Don't need any rewards points but have a question -
Is it true that if the COLA was based on another CPI indexed formula (the R-CPI-E rather the CPI-W, as now) which includes other type of expenses that hit seniors $$$ harder (like Medical expenses) then the COLA would be higher. If so, how much how much higher? From my readings on it, it appears to be a pretty minuscule amount - at least yearly, maybe more over the length of retirement. Other than Medical and Medicine, what other categories of expenses are considered between these two CPI indexes being compared in this research?
The CPI-E isn't always higher than the CPI-W. A CPI-E based COLA for 2022 would see you getting less than the CPI-W. A COLA for 2022 based on the normal third quarter average CPI-E year-to-year would only be 4.8%. A straight month-to-month index from September 2020 to September 2021 CPI-E COLA would be 5.0%, almost a full percent less than the CPI-W value COLA. Use the All Items values to calculate the value.
@roachme - I can see how that would / could happen in some years - especially in a year like we just went thru - the "covid - shut down year". Many people really didn't go to the doc / dentist and the government paid for much of the covid cost.
Good morning, @GailL1 You are correct; the cost-of-living adjustment (COLA) is based on changes in the CPI-W, more formally known as the Consumer Price Index for Urban Wage Earners and Clerical Workers. According to the Social Security Administration (see A6 reform provision here), switching to the CPI-E would increase the annual COLA by about 0.2 percentage points on average. For just a year or two, the impact is small; however, over a 20 to 30-year period of receiving benefits the difference can add up. The difference largely comes from the greater weight the CPI-E puts on medical costs.
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