Every day, 10,000 or so baby boomers are
turning 65. Some of you have probably already retired. Many are likely counting
the days until they can leave the full-time workforce. For many of
you, Social Security will be a major part of your retirement income. With
that in mind, it is important to know how Social Security will be changing for
2020.
Here are six ways that Social Security will be
changing in 2020.
1) Dipping into
the Social Security Trust Fund
Without some major action from Congress, the
current excess trust fund revenue will be depleted by the year
2034. If this occurs, it is estimated that Social Security would
only be able to pay less than 80% of the promised benefits from ongoing payroll
taxes.
Donald Trump has thrown out lowering the
payroll tax in an attempt to spur the economy. If the government takes this
action, the Social Security trust fund would likely be depleted faster.
2) Full
Retirement Age Has Increased
For those still a few years away from
retirement, those born in 1960 or later, the full retirement age has increased
to 67. You will still be able to start taking Social Security Retirement
Benefits at age 62, but with reduced monthly payments.
3) Cost of Living
Adjustment
Low inflation is a good thing for consumers,
as it means pricing isn’t going up that quickly. On the other hand, lower
inflation numbers mean small cost of living increases for your Social Security
benefits. In case you didn’t know, your Social Security benefits may be
increased each year, partially depending on inflation numbers.
For 2020, the Social Security cost of living
adjustment is expected to be around 1.8%. Not life-changing, but if you are
living off of Social Security alone, every penny counts. For the average
retiree, this would likely amount to around $25 more per month. For the
highest earners, this could come closer to $50 more per month in Social
Security retirement benefits.
4) Maximum Social Security Benefits Will
Increase
For workers near the top of the Social Security income scale, $132,900 or
more for 2019, your maximum Social Security payout will likely increase
slightly in 2020. No individual at full retirement age can take
home more than $2,861 per month, regardless of their pre-retirement
income. This number can be increased by delaying Social Security until the
age of 70. Oprah won’t get more than this at full retirement age, neither
will you.
Could you live off of $34,332 per year? I would not find that a pleasant standard of living here in Los Angeles. You
can take home more than this amount in Social Security benefits if you delay
your benefits until you reach the age of 70, but still, it would be rough to
get by in most big cities.
In case you were wondering, waiting till 70
could increase your Social Security benefit by 32% compared with the starting
benefit at 66. This takes the maximum monthly benefit up to about $3,776 per
month.
5) More of Your
Social Security Will be Taxed
Yes, your Social Security benefits are
taxable. The amount that is hit with taxes will depend on household income
levels. Just fifty percent of your benefits will be taxed if your income
is between $25,000 and $34,000 as an individual. That goes up to $32,000
to $44,000 for a married couple, still another example of the marriage penalty.
Hopefully, everyone reading this will have
more income than that to live off in retirement. If so, 85% of your Social
Security benefits will be taxable. That is assuming you have an income in
retirement above $34,000 (individual) or $44,000 as a married couple.
6) End of Two
Great Social Security Maximization Strategies
File and suspend was a great social security
maximization strategy that is no longer available to younger
Americans. The last few baby boomers who were grandfathered into
eligibility will turn 70 in 2020. Seventy is the latest you can wait to
start your Social Security benefits.
I may joke that congress doesn’t do anything,
but they did manage to take action to prevent people who reach full retirement
age in 2020 (or later) from filing for a restricted claim of spousal benefits.
Like file and suspend, this was a strategy to help smart couples maximize their Social Security benefits. Thanks
a lot.
Whatever your age, take a moment and register
for access to your Social Security Benefit estimates. Visit ssa.gov,
just take a few minutes and you will be able to find more information about
Social Security, and more importantly, what it will mean for your retirement.
Think about your Social Security benefits when
you vote in 2020 as well. With record deficits and the skyrocketing national
debt, there are rumblings of draconian cuts from Trump and the Republicans to
programs like Social Security and Medicare.
Make today the day you find out if you are on
track for the type of retirement you want. What do you have to lose? Peace of
mind today, hopefully a happier, healthier and wealthier retirement in the future.
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