Social Security Changes in 2020 and How They Affect You
For many retirees, Social Security represents the largest part of their retirement income. Therefore, changes made to the program can have a large impact on millions of Americans. Starting in 2020, there will be some new changes to the program. Below you will find some of the major changes and how they could affect your benefit.
Monthly Benefits Increase
Beginning in January 2020, Social Security recipients will get a raise due to an increase in the Cost-of-Living Adjustment (COLA). Announced in 2019, Social Security recipients will receive a 1.6% COLA increase. This means the average individual beneficiary can expect their benefits to increase from $1,479 to $1,503 per month. Couples who are currently both receiving benefits on average will experience an increase from $2,491 to $2,531. As a result, you’ll receive an extra $288 throughout the year or ~$24 every month.
Cost-of-Living Adjustment (COLA) was implemented in 1975 to counteract the effects of inflation.
Maximum Monthly Benefits Increase
Were you aware that there is a limit to the monthly amount of Social Security benefit you can receive? The good news is that for 2020, these benefit amounts have increased. So, starting this year the new amounts are as follows:
- For those filing at age 70, the max benefit is $3,790
- If you are filing at full retirement age (currently age 66) the amount is $3,011
- Finally, if you are filing at age 62 the amount is $2,265
Earnings Limit Rises
Many retirees work part-time in addition to collecting Social Security benefits. The earnings limit for 2020 has increased from $17,640 to $18,240. While the earnings limit disappears once you reach full retirement age, those that are collecting benefits and are younger than full retirement age could see their benefits reduced. The deduction is $1 in benefits for every $2 earned beyond $18,240. This limit increases to $48,600 in the year you reach full retirement age before disappearing completely at full retirement age.
Annual Tax Cap Increases
The amount of earnings that are subject to the 6.2% Social Security Tax is increasing in 2020 to $137,700. This is an increase from the 2019 amount of $132,900.
Earnings Required for Work Credits Increases
In order to qualify for Social Security benefits, you must have earned 40-lifetime work credits. You can earn up to 4 credits per year. As of the beginning of this year, the amount of income you need to earn in order to receive a credit has increased from $1,360 to $1,410. So, in order to receive a full year’s worth of credits, your yearly income will need to be at least $5,640.
Supplemental Security Income (SSI) Amount Increases
SSI is a federal program that helps provide items such as food, clothing, and shelter to those who are aged, blind, disabled or have little to no income. The amount of this benefit will also increase in 2020 from $771 to $783 for an individual and from $1,157 to $1,175 for couples.
Check Your Monthly Benefit by Setting Up an Account at SSA.gov
If you have not already, it is a good idea to get an online account set up with the Social Security Administration. Not only can you access information about updates to benefits but you can also keep an eye on your own benefits on a monthly basis. To register, you can visit www.socialsecurity.gov/myaccount.
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