2020 awi covid glitch and cola

I'm one of those unfortunate individuals who turned 60 during covid, and I'm waiting to see if and how much the average wage index dropped in 2020, to see if it will impact my SS benefits, and waiting to see if Congress will fix it. The fix they're most likely to make would prevent a reduction in benefits, but it will still be several percent lower than what my benefit projections have been promising me (since the projections were made pre-covid and based on an expected increase in the awi of several percentage points).

Now I'm wondering if I'm going to get hit with a double whammy. Am I correct in thinking that, if Social Security gives a 6 percent cola next year because of the current jump in inflation, only those who are 62 and older get the boost to their benefits (since my initial benefits won't be calculated until I turn 62 late next year)? So I and my 1960 cohorts could not only see benefits 3 to 10 percent lower than what 1959 babies would receive, but we'll fall another 6 percent behind them due to transitory inflation?

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Honored Social Butterfly

I have not seen any movement on this in 2021 as of yet - the legislation introduced in 2020 has passed into a new Congress and thus has to be re-introduced for anything to happen.


However, that does not mean that it is out of mind - not by SSA or by Congress - it is just something they need to get around to fixing.  They never fixed it in 2009 but that pales to 2020.

It is also more of an effect on certain industries and on certain income levels so IMO it is more of a bigger deal especially considering the income level of many affected in these industries.


You don't have to worry about any current COLA increase - that only comes into play over the long term - IOW, if they fix it (as best they can) COLA increases once you start SS will progress as normal.  However, if they don't fix it - your ongoing (lower) SS benefit once you start on it will have an over-time reduction in COLA because it is a % of the benefit that you get. - So it would be cumulative from the time your start the (reduced AWI) SS benefit.  An over-time reduction.


Let's hope for a fix - there are several ways to fix it.  Of course, there is always some folks that won't fit into the fix - but most will.  There is still time for this fix - and even into next year or (2) years cause they could always adjust it after the fact and re-compute.


Do you want to know some of the ways they are considering a fix?  I can post the links if you do  - let me know.

Here is a list of the Senate members to contact that are leading the way to a fix.   (see the list at the end of the letter in the link)

Cassidy - - 02/2021 Senate letter to leaders on fixing the 2020 AWI Covid Calculation 

In the House - Representative John Larson (CT-01)

Be proactive and then follow what is happening.




It's Always Something . . . . Roseanna Roseannadanna
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Thanks for your reply, but I’m not sure I get why you say the COLA doesn’t matter. When inflation is average, everybody’s in the same boat, losing the same amount during that one year they miss out between 60 when their past wages are indexed and 62 when their initial benefit is calculated. But my cohort get the double whammy of benefits down at 60 and inflation up at 61. I just retired, about to turn 61, somewhat forced out by covid cutbacks. Anyone younger and still working will likely get raises to keep up with cost of living (as well as seeing future awi’s that reflect a higher national wage level), and anyone older than me will get a big bump in benefits next year (some of which will be eaten up by correspondingly higher Medicare premiums), but my cohort are in no-man’s-land where we miss out on what could be the biggest bump in COLA in many years, while we will still have to pay the higher premiums for Medicare going forward. So even if Congress fixes the glitch, I’ll still lose 3.5% compared to what the SSA has said I’d get, and another 6% in buying power. That’s effectively a 10% cut in benefits from here to eternity all because a down year in awi was followed by a high year in inflation; the double whammy. 

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Honored Social Butterfly

The COLA would only affect this problem for the long-term in case they don't get a fix done. 


The COLA doesn't start until you begin your SS benefit - it is computed using the current year CPI for the following years benefits.  It is a percentage of whatever your current benefit is for that year.

Say you get a SS monthly benefit of $ 1000 (just using this cause it is easy for the math).  For 2020, those who were already receiving SS benefit got a COLA of 1.3%.  In this example:  ($ 1000 X .013 = $ 13.00)  so the SS benefit increased to $1013 monthly for 2021.


If the SS benefit itself is understated when you start receiving it (without a fix) then any COLA for any year afterwards will be understated - because it would be cumulative that will increase over time IF THE DON"T FIX IT.

A percentage of a bad number just makes the next number worse.


The AWI 2020 problem doesn't have anything to do with how the CPI is computed and the one they use for the annual COLA - If the AWI 2020 problem is corrected by some manner - the COLA will be correct when you begin your benefits.


The SS AWI (2021) for this year based on 2020 affects your benefit calculation when you file for benefits.  


The COLA calculations for 2021, in effect for 2022, won't affect your benefit because you aren't getting one yet -  the earliest you can file for your Old Age benefit is 62 and you are just now reaching 61.


It is the AWI - which affects the amount of your SS benefit when you file is what has to be corrected - hopefully.  


Try This Link:  especially read the parts entitled:

  • Effects of Price Indexing
  • What Can Be Done?

Congressional Research Service: 07/13/2020 - Social Security Benefits and the Effect of Declines in ... 



It's Always Something . . . . Roseanna Roseannadanna
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