The good news is that Social Security Benefits are increasing in 2020. In case you didn’t know, there are social security changes every year, partially based on the annual cost-of-living adjustment (COLA). Federal benefit rates increase when the cost of living rises, and for 2020 that increase will be 1.6 percent. While that is good news, the increase isn’t the only change that will affect Social Security in 2020. From an increase in the full retirement age to higher maximum taxable earnings, these are the 2020 Social Security Changes you need to know.
Full Retirement Age Has Increased
Seniors born after 1937 but before 1960 have a retirement age of 65. However, for those born in 1960 or later, the full retirement age has increased to 67. The earliest you can start receiving Social Security retirement benefits will remain age 62, but with reduced monthly payments. For example, if you start receiving retirement benefits at 62, you will get 70 percent of the monthly benefit. This happens because you will be getting benefits for an additional 60 months. If your full retirement age is 67, but you start receiving retirement benefits at age 65, you will get 86.7 percent of the monthly benefit. Again, this is because you will be getting benefits for an additional 24 months.
Maximum Taxable Earnings Has Increased
Yes, Social Security benefits are taxable, and in 2020 more of your Social Security will be taxed. The amount of your earnings that is taxable will depend on your household income levels. If your income as an individual falls between $25,000 and $34,000, then 50 percent of your benefits will be taxed. Married couples will have their benefits taxed at 50 percent of their income falls between $32,000 to $44,000. Individuals making above $34,000, or married couples making above $44,000, 85 percent of your Social Security benefits will be taxable.
Cost of Living Increase
When inflation rises, the cost of living increases. When the cost of living increases, Social Security benefits increase. For the average retiree, this increase will amount to around $25 more per month. Cost-of-living increases are based on a variation of the Consumer Price Index (CPI) called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, and it is compiled by the Bureau of Labor Statistics. The CPI-W measures the changes in consumer prices certain workers are exposed to and only includes information from certain demographics. Based on the increase in the CPI-W from the third quarter of 2018 through the third quarter of 2019, Social Security beneficiaries will receive a 1.6 percent cost-of-living increase for 2020.
Maximum Social Security Benefits Will Increase
Previously no individual at full retirement age could take home more than $2,861 in Social Security benefits per month, regardless of their pre-retirement income. In 2020 the maximum Social Security benefit will increase to $3,011 per month for workers near the top of the Social Security income scale. Seniors who choose to delay their benefits until they reach 70 can take home more than this amount. 70 is the latest you can wait to start your Social Security benefits.
Whether retirement is just around the corner or several years away, it’s always a good time to start planning for retirement. Coverage Made is here to help with the useful information you need to make wise financial and insurance decisions. Find out how the right insurance professionals can help you prepare for retirement.