It’s certainly been an eventful couple of weeks since our last episode! There’s a very good chance that the first round of COVID-19 vaccines will be administered to our frontline medical heroes before the end of the year. We also saw the Dow Jones pass the historic 30,000 mark for the first time in history. And while that milestone reveals that there’s still some disconnect between Wall Street and Main Street in terms of our economic recovery, we certainly have some very positive signs pointing us towards 2021.
On the political front, as states around the country finished counting, recounting, and certifying their vote totals, President-elect Joe Biden started to formalize his transition and announce some of his cabinet nominees. As we move closer to Biden’s swearing-in on January 20th, we thought it would be a good time to remind folks of some changes that are coming to Social Security next year and also discuss potential changes that the President-elect pitched on the campaign trail.
Listen to the Episode
Simply "click" or "tap" on the "play" icon in the image below to listen to the episode. If you'd like to subscribe to the podcast using an Apple product (iPhone, iPad, iPod touch) click here to learn how. If you use an Android phone, we recommend using the Podcast Addict App, which can be downloaded here.
1. These changes ARE coming.
As we discussed in a recent blog post, you and your fiduciary advisor should discuss three changes that will affect 2021 Social Security benefits:
- The 2021 cost-of-living adjustment (COLA) is going to be 1.3%. On average, seniors should expect about a $20 per month increase to their benefits and a $33 per month increase for couples. Earlier in the year there was some concern that COVID-19 would drive up Medicare premiums high enough to offset any Social Security benefit increase, but in 2021 Medicare is only going up by $3.90 per month.
- Beneficiaries who are not yet at their full retirement age but still working will be able to earn up to $18,960 before one benefit dollar is withheld for every $2 earned above the limit. If you’re thinking about setting up your own consulting firm or teaching part time in retirement, be careful about taking your Social Security benefits early or you could end up owing the SSA come tax time.
- Anyone who is turning 62 in 2021 will have to wait until they are 66 years and 10 months old to claim full retirement.
2. These changes are … Well, who knows?
During his campaign, President-elect Biden had two goals for improving Social Security: increasing benefits to low-income workers, widows, and widowers, and shoring up the solvency of the fund.
Under President-elect Biden’s plan, if a person works for 30 years at low-paying jobs and earns a very low Social Security benefit, the benefit would be increased to equal 125% of the federal poverty level ($1,300 in 2019 rates). Biden would also ensure that after the death of a spouse, the survivor receives at least 75% of the amount that the couple was receiving. Currently, when both spouses are receiving Social Security and one dies, the lower of the two Social Security benefits drops off for the survivor.
President-elect Biden has proposed paying for these changes by creating a “donut hole” in the FICA tax that would affect folks earning over $400,000. As the Biden administration looks for new approaches to entitlement spending and stabilizing the country post-COVID, it’s also possible that we’re going to hear more about Modern Monetary Theory, which argues the U.S. should spend on essential programs now and stop worrying about matching the bill to tax revenue.
Whether a (likely) Republican-controlled Senate is going to warm to these ideas is just one of the many challenges Joe Biden will be facing in January.
Remember, one of the reasons the markets have been up since the election is that investors love divided government. The same gridlock that could stall potential changes to Social Security in Washington also creates the kind of stability that often drives positive returns on Wall Street.
Which is why, once again you shouldn’t let the political rhetoric influence your financial planning until the various proposals actually become law. Instead, schedule a call so that we can talk about the changes to Social Security that are definitely coming next year and all of the other important financial transitions you’re anticipating.
Please share this page and the podcast with your friends and colleagues via Linkedin, Twitter and Facebook. You can use the share buttons. Thanks! Got a question or comment? Email it to me and we'll get back to you or call our office at (913) 624-1841.
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.
The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.
The Amazon Best Seller ranking listed on marketing materials is specifically referring to Best Seller rankings for the Kindle Top 100 Paid Lists under the subcategories of: Budgeting and Financial Risk Management, based on data as of September 5, 2019. Amazon rankings although relevant on how a product is selling overall doesn’t necessarily indicate how well an item is selling among other similar items or similar item categories. Amazon may choose the most popular categories or subcategories within which an item has a high ranking to determine its best seller rankings. These rankings are updated hourly and as a result, should be expected to fluctuate as such. Keen Wealth Advisors and Amazon are not affiliated entities.
The Steve Sanduski Advisor Network, Belay Advisor, LLC and other third-party contributors to our blogs and podcasts are not affiliated with Keen Wealth Advisors.
For additional details on Keen Wealth Advisors, please visit https://www.keenwealthadvisors.com/important-disclosures.