Social Security and COVID-19: 5 Things You Should Know

We’re more than halfway through 2020 and one thing is abundantly clear – the Coronavirus is just as much a financial crisis as it is a health crisis. Millions of Americans have watched their nest eggs dwindle due to stock market declines, layoffs and furloughs.

This crisis has affected us all, but anyone retiring in the next year or two is especially vulnerable as they prepare to pull from retirement accounts and collect Social Security.

When conducting a financial analysis for retirement planning during a global pandemic, here are 5 things you need to know about Social Security.

1. Your Benefits Haven’t Changed Because of COVID-19

COVID-19 has changed a lot of things – but your Social Security benefits aren’t one of them. If you’re currently receiving benefits, your monthly payment will remain the same. If you don’t currently claim Social Security benefits but were planning to in the next year or two, there’s good news there too. The Social Security Administration hasn’t stopped processing applications, so you’re all set to apply when it’s time.

The rules to claim Social Security haven’t changed. You’ll still get:

  • 75 to 99.4 percent of your benefit amount if you claim before full retirement age
  • 100 percent of your monthly benefit amount if you claim benefits at full retirement age
  • 7 to 132 percent of your benefit amount if you wait until closer to age 70

For example, if your monthly benefit amount is set to be $2,500, you could receive $1,875 if you claim at age 62, $2,500 if you wait until full retirement age, or $3,300 if you wait until age 70.


So many people file for Social Security without thinking about it, potentially leaving thousands of dollars on the table. Contact Heritage Capital for a Social Security analysis and to determine your options.


2. You Could Pay More Taxes This Year

Receiving stimulus checks, taking early withdrawals from retirement accounts and pulling from investment accounts are all things that can bump you into a higher tax bracket. Yet these are all actions many Americans have had to take to meet their basic financial needs during the Coronavirus pandemic.

There is some hope, though. The Coronavirus Aid, Relief and Economic Security (CARES) Act suspended Required Minimum Distributions (RMDs) for 2020, which means those over age 72 aren’t required to take these distributions and count them as taxable income.

But just because you don’t have to take RMDs this year doesn’t mean you necessarily shouldn’t. If you think you’ll be in a higher tax bracket in the future, or if you need your RMD to cover living expenses, you may be better off taking some of it now.

For those currently claiming Social Security benefits, you could pay taxes on up to 85 percent of your payment if your income exceeds a certain threshold:

  • For single filers:
    • 50 percent of Social Security benefits get taxed if your combined income is $25,000 to $34,000
    • 85 percent of benefits get taxed if your combined income is above $34,000
  • For married filing jointly:
    • 50 percent of Social Security benefits get taxed if your combined income is $32,000 to $44,000
    • 85 percent of benefits get taxed if your combined income is more than $44,000

If you’re strapped for cash during the pandemic, it may be difficult to stay within these thresholds. But you should keep an eye on them if you can.

Pro tip: Taxes are one of several unexpected risks to your retirement. We encourage you to meet with a trusted financial advisor who can help review your income for the year and make a plan to minimize taxes. When conducting a financial analysis for retirement planning, it’s important to factor in taxes.

3. Watch Out for Social Security Scams

Even in the midst of a global pandemic, there are scammers who will try to take advantage of people, especially those receiving or who are at an age where you’re eligible to receive Social Security benefits. We’ve seen countless reports of fraudulent letters being sent to Social Security recipients saying they’ve suspended their benefits.

The Social Security scam reportedly works like this:

  • You receive an official-looking letter in the mail saying Social Security has suspended your benefits (or will if you don’t send in specific information now).
  • You’re required to call a phone number to get your benefits reinstated.
  • When you call, they ask you to “verify your identity” using your Social Security number or bank account information.

In some cases, the person may ask you to send them a wire transfer or other form of payment to reactivate your benefits.

First and foremost, you should know that the Social Security Administration will never ask for your Social Security number or bank account information over the phone or through an email. Secondly, remember that Social Security hasn’t canceled or suspended anyone’s benefits due to COVID-19.

If you receive a letter, phone call or email resembling this situation, immediately report it to the Office of the Inspector General. Always call the Social Security Association directly if you’re wondering if a communication is legitimate.

4. The Social Security Administration May Have Longer Wait Times Than Usual

The Social Security Administration closed its local offices at the onset of the Coronavirus pandemic. But you can still get help online and over the phone. Wait times for benefits and one-on-one assistance may be longer than usual, so the Social Security office recommends viewing its list of self-service options on its website before you call.

Here’s a shortlist of everything you can do through the online portal:

  • Apply for retirement, disability or Medicare benefits
  • Check your application status
  • Review your earnings history
  • Estimate retirement benefits
  • Set up direct deposit
  • Change your address
  • Submit proof of benefits

If you apply for benefits in the near future, prepare to face longer processing times than normal as offices remain closed until further notice. When conducting a financial analysis for retirement planning with your financial advisor, see if there are ways to stretch your budget if your benefits are a little late.

5. COVID-19 Could Have Long-Term Effects on Social Security

Although Social Security benefits haven’t changed due to COVID-19, that doesn’t mean they won’t change in the future.

Social Security gets most of its funding from payroll taxes. With more than 42 million people filing for unemployment last month, there could be less cash to payout in the future.

The Social Security Administration was already facing solvency issues before the Coronavirus. There weren’t enough payroll taxes to cover benefits, so to bridge the gap, it was necessary to tap into the Social Security Trust Fund. These trust funds were already predicted to run out by 2034. But the Coronavirus pandemic could cause them to dry up even quicker. It’s estimated that payroll tax money covers 76 percent of scheduled benefits. So, if the unemployment rates stay high for much longer, we could see cuts in the future.

Talk with your financial advisor about any concerns you have about Social Security.

The Bottom Line

Preparing for retirement during the Coronavirus pandemic can be overwhelming. But understanding how this crisis impacts your Social Security benefits can bring some peace of mind. The Coronavirus hasn’t affected Social Security so far, but that doesn’t mean there won’t be long-term impacts. We encourage you to be aware of how Social Security plays into your current financial situation and stay vigilant against scams.

At Heritage Capital, we specialize in realistic financial planning and personalized retirement planning. With so much uncertainty surrounding your future, contact us to discuss your options. When conducting a financial analysis for retirement planning, it’s important to get a comprehensive picture of what your financial future will look like.



Paul Schatz, President, Heritage Capital