Continuing with the effect the coronavirus pandemic has had on Social Security disability benefits there are changes in cost as well.
The coronavirus pandemic lowers nominal Social Security costs in three ways:
⦁ Increase mortality rates (skewed towards those of retirement age), which reduces total benefits paid out of the Trust Fund.
⦁ Lower inflation reduces the Cost of Living Adjustment (COLA) adjustment to benefit payments.
⦁ Initial benefits claimed at retirement fall due to two factors: (a) depressed earnings history of beneficiaries, many of whom lost their jobs.
In a simpler explanation of the above points, less money has to be paid out in the future due to less SSI/SSD recipients and SSI/SSD recipient earnings.
Average Wage Index (AWI) decrease factor that is applied to initial benefits. AWI that is smaller equals reduced benefits. This also applies to retirees who were still employed during and through the pandemic.