The Stimulus Check bill passed by Congress in December 2020 provided a second round of Economic Impact Payments (also referred to as stimulus checks) to help Americans cope with the effects of the pandemic.
The bill also extended many existing tax benefits and created new ones, including some specifically aimed at retirees. At the same time, it took more sweeping steps to change the way Social Security works. The key question is whether these changes are good news for seniors currently retired or about to retire. For those who have already filed for benefits, it’s too late for 2021 unless you withdraw your claim and wait until 2023 to refile.
Stimulus Check Payments To Look Out For
The bill also extended many existing tax benefits and stimulus checks and created new ones, including some specifically aimed at retirees. One example is a provision that allows seniors to contribute up to $1,000 to a traditional IRA or Roth IRA without incurring an early withdrawal penalty.
Another noteworthy change is the creation of a new 15% income tax bracket for married couples filing jointly with taxable income between $32,000 and $64,000 (or between $25,000 and $50,000 for singles). This means that if your household earns less than these amounts but still has too much taxable income for the 10% rate (for you or your spouse), then you can apply this rate as well.
At the same time, it took more sweeping steps to change the way Social Security works. The bill introduced a new way to calculate benefits that will affect everyone who turns 66 or 67 in 2021 or later. It will reduce the amount of stimulus check benefits they receive.
And for those born in 1960—who are turning 62 this year—the new plan stops an automatic increase known as the “file-and-suspend” option, which allowed some seniors to claim retirement credits while still on the job at full pay and then collect higher monthly checks once they turned 65.
If you have already filed for benefits before April 2020, it’s too late. The new rules won’t affect you.
If you file between May 2020 and March 2021, the amount of your monthly benefit will be determined by a formula that factors in wage history and other earnings. If your benefits are reduced under this method compared to what they would have been under the old rules, then there is nothing that can be done now — even if those reduced payments result in a lower net income than what you were receiving before filing (as long as they’re higher than zero).
The good news is that people who filed after April 2020 but before October 2020 can still withdraw their applications and wait until 2023 to refile them under the new rules (which will only apply from January 2022 forward). However, once again: do not withdraw an application unless absolutely necessary!
