Just when our blog material file was thinning comes the gift of a looming periodic cicada outbreak that will envelope the Eastern US in a few weeks.
Talk about a crazy spectacle of nature. The periodic cicada hatches as a nymph in a tree, then falls to the ground, burrows into the soil and sucks liquid from tree roots as food - for seventeen years! It then emerges precisely seventeen years later. The ground temperature needs to reach 64 degrees before the insects decide to tunnel out and party.
Like most teenagers, the periodic cicada does little work above ground, hanging out in trees and shrubs, singing loudly in a multi-trillion member band seeking the attention of a female cicada. After reproducing, the critters die in mass, leaving a hot stinky mess across yards and forests. The spectacle lasts for two months during the summer months - every seventeen years. Wild.
As a numbers guy, I am fascinated with the seventeen-year cycle thing. I am pretty good at guessing the time of day, but that’s a ridiculously good body clock. There are also thirteen-year periodic cicadas as well, both of which are prime numbers. Hmmm. QAnon is fixated on the number 17, perhaps they can offer an explanation.
Entomologists are clueless as to the reason for the periodic cicada’s long, precise life cycle, but believe they emerge in massive numbers as a survival technique to overwhelm their predators.
The 2021 cicada swarm even has a team name: Brood X, which is the largest of the fifteen periodic cicada species.
The brood cicada is a large, ominous-looking insect with bulbous red eyes but is harmless. They don’t bite or sting but can prick your skin with their mouthparts if handled. They do, apparently, make for a healthy snack. They are a high-protein, low calorie food and there’s an array of cicada recipes online.
There are even cicada cookbooks that include dishes like “soft shell cicada” and “banana cicada bread”. One caveat: don’t eat them if you’re allergic to shellfish.
The brood cicada plays an important ecological role by aerating the soil, aiding tree health and serving as a plant nutrient after decomposition.
I read where a brood cicada event in 1634 freaked out the Pilgrims in Massachusetts, who ignorantly referred to them as locusts. However, unlike locusts, cicadas do not damage plants but can wreak havoc on young trees and shrubs due to their overwhelming numbers.
I don’t remember being bugged out in summer 2004 during the last Brood X cicada invasion. I enjoy the rhythmic sounds of the annual cicada population during the dog days of summer. However, the decibel level of the mating call of these periodic buggers equals the sound of a lawn mower. With trillions of them perched everywhere and my middle age sleep issues, it could make for a long July.
Evidently, in 2004 the brood cicadas caused several car accidents after flying into open car windows and freaking out the driver. It should be a fun summer.
Speaking of weird number events, here’s another one. A client recently brought to our attention a “bug” in the Social Security retirement program for folks who turn age 60 during challenging economic times - like 2020. At first dismissive, I’ve since learned the program flaw does represent a material financial risk for those unlucky enough to have been born in 1960. Let me expound.
The formula to compute your Social Security benefit has remained essentially unchanged for decades. For all years prior to age 60, your taxable earned income - wages or self-employment income - is taxed, tracked and adjusted for inflation.
You can view your most recent Social Security earning record online by registering at myssa.gov.
When you start your Social Security benefit, the amount is calculated based on your highest thirty-five years of inflation-adjusted earned income; zero income years are included in the formula. Any earned income past age 60 is not adjusted for inflation.
Wage indexing is a good thing. For example, if you earned a $20,000 salary in 1990, the “indexed” value may be $40,000 in the benefit calculation. However, there’s a serious flaw in the formula that has the 1960 vintage naturally perturbed.
The formula used to calculate your “average wage index” is based on the final wage index value in the year you turn age 60. Each indexed wage by year before age 60 is calculated using the “age 60” wage in the denominator. This places an undue significance on what happens in the US economy during one pivotal tax year.
In 2020, the year that folks born in 1960 turned age 60, the US had an historically bad economic event that destroyed the total number of workers and W2 wages nationwide, the two key components used in the average wage index formula.
The upshot is a materially lower calculated average wage index for 2020 - all due to the outsized impact of a weird adverse economic event occurring towards the end of one’s working career.
Per the SSA, a 9% permanent benefit reduction will occur to the 1960ers compared to someone with the same taxable earnings profile born in 1959 or 1961 - ouch.
For folks born after 1960, the same misfortune could happen to you if the economy should turn sour during your 61st year.
For the four million Americans born in 1960, this is a real financial problem with no ready solution, at least not yet.
The formula bug must be fixed before 2022 when the taxpayers turn age 62 and first eligible to start early Social Security benefits or the financial impact will be permanent. Congress is supposedly working on a permanent fix, just don’t hold your breath.
Your future Social Security benefit should not have an economic lottery factor, so good luck to you avoiding the age 60 benefit bug.
The takeaway is that both taxpayers and planners should fully appreciate how the Social Security formula works and integrate it into your retirement planning model.
Until next time, be well….Tim