3 ways the coronavirus pandemic could take a bite out of your Social Security benefit

Immediate financial pain that this crisis is causing Americans is just the beginning

The COVID-19 pandemic has in the past few months gone from bad to much worse across most of the United States, and it's clear that the crisis is likely to remain acute not just for the rest of this year, but a good part of 2021 as well. That poses obvious risks to your health and to the U.S. economy. But it also means that down the road, your Social Security benefits may take a hit. Here's why.

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1. You may not get to work a full 35 years

Each person's Social Security benefits are calculated based on their average inflation-adjusted earnings for their 35 highest-paid years in the workforce. But tens of millions of Americans have already been laid off during the pandemic, and more pink slips are coming.

If you lose your job and are unable to find work again until the pandemic is brought under control -- or worse, until the recession it spawned ends -- you could easily wind up spending a year or more unemployed. Indeed, about half the people who have been laid off so far in 2020 don't think it's a temporary thing -- they think their old jobs are gone for good.

A long period of joblessness could leave you with fewer than 35 years of wages under your belt. If that happens, you'll have a $0 factored into your personal benefit equation for each year short of 35 employed that you are. And even if your working life still hits or exceeds that length, a job loss may take away what would have been high-earning years from the peak of your career. That in turn will leave more of your lower-wage early working years in the calculation. Those are far better than zeros, but they'll still bring down your average, and your monthly Social Security benefit.

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Of course, one way to compensate for that would be to postpone your retirement and tack replacements for those lost years on at the end of your career. But given that a good 48% of workers actually wind up retiring sooner than planned, you shouldn't count on being able to stay in the workforce for as long as you'd like.

2. You may have to accept a lower wage when you get back into the workforce

People who have been out of work for quite some time tend to get desperate, and employers know it, which means those folks have less negotiating leverage when a job offer arrives. If you're jobless for the better part of 2020 or well into 2021, you may find yourself forced to accept a lower salary from your next employer than you were paid by the last one. And that, too, will reduce your Social Security benefits.

3. You may have to file for benefits early

You're allowed to claim Social Security as early as age 62, and if you're out of work for an extended period of time due to the pandemic, you may need to file for those benefits early. But doing so before full retirement age (today between 66 and 67) means taking a permanent reduction in the size of your monthly benefit.

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How to compensate for a smaller Social Security check

The bad news, clearly, is that there are many reasons why your Social Security benefits could wind up smaller due to the pandemic. The good news, however, is that Social Security is only supposed to make up a portion of your total retirement income, so if you buff up the ways you're going to supplement it, a lower benefit may not hurt you all that much.

A good way to compensate for the prospect of lower benefits is to boost your retirement savings. If you're unemployed now, you may have to put that idea on hold, but once you're back to work, start consistently setting money aside in an IRA or 401(k). If you were already doing that, look for ways to increase the amount you contribute each month.

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You can also plan to work during retirement. Sign up for a part-time job when you're older or join the gig economy -- the choice is yours.

And these are just a few ideas. The point, however, is that Social Security is only designed to replace about 40% of your pre-retirement income, assuming you're an average wage-earner. Most retirees will need roughly twice that amount to live comfortably. But if your benefits aren't going to be quite that generous, you'll have more work to do to reach that financial comfort zone. The sooner you start planning for that, the better your odds of dodging a world of money-related stress when your senior years roll around.

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