An
estimated 61 million people collect Social Security benefits -- for many it is
the only source of retirement income.
Changes
to the Social Security Administration pension program are an annual event and
2020 is no different. Some changes are due to formulas, while others are part
of the legislative framework underpinning Social Security.
Here
are six changes announced by the SSA last month:
Benefits
are increasing. Seniors are getting a raise, but unfortunately, not as big
of one as this year. The annual cost-of-living adjustment is tied to the
Consumer Price Index for Urban Wage Earners and Clerical Workers and is 1.6%
for 2020.
Seniors
received a 2.8% increase this year. The COLA is designed to keep pace with
inflation, not necessarily exceed it.
"The
average of all Social Security recipients together, the average of their
monthly increases is going to equate to about $24 a month," said Brian
Doherty, author of the 2015 book, Getting Paid To Wait – Bigger Social
Security Benefits the Simple and Easy Way.
A
higher monthly maximum payout. According to the
SSA, the maximum monthly benefit at full retirement age will increase by $150 a
month to $3,011.
To hit
Social Security's maximum monthly benefit, a worker would need to have hit or
surpassed the maximum taxable earnings cap for 35 years. SSA takes your 35
highest-earning, inflation-adjusted years when calculating your retired worker
benefit.
Retirement
age continues to increase. The full retirement age will increase
next year by two months to 66 years and eight months for persons born in 1958.
Anyone born before 1954 or earlier has a full retirement age of 66. But for
those born after that, the full retirement age increases in two-month
increments and stops with those born in 1960.
Anyone
born in 1960 and later has a full retirement age of 67.
The
earnings cap rises. As it stands, once you surpass $132,900 in earnings, you
no longer have to pay FICA taxes, which fund Social Security. That earning cap
is increasing to $137,700 next year.
"That
only effects wealthy people and it’s only about 6% of all wage earners in this
country that have earnings that exceed that earnings cap," Doherty
explained. "So 94% of people pay those FICA taxes on all their
earnings."
Disability
benefits increased. While primarily a retirement pension program, Social
Security also provides a monthly benefit to 8.4 million disabled workers, and
about 1.6 million spouses and children of disabled workers. Those recipients
are getting an increase as well.
Non-blind
SSDI recipients can get a $40 monthly bump to $1,260, while blind SSDI
beneficiaries can take home $70 more extra a month ($2,110 per month).
Early
filers can earn more. Social Security recipients who take benefits early but
keep working will be able to earn a little bit more in 2020.
Filers
who will not hit full retirement in 2020 are allowed to earn $18,240 ($1,520 a
month) without any withholding -- up $50 a month from 2019. After $18,240,
however, the SSA can withhold $1 in benefits for every $2 in earned income.
Filers
who reach full retirement age in 2020 are allowed to earn $48,600 ($4,050 a
month) before any withholding, an increase of $140 a month from 2019. SSA will
take $1 in benefits for every $3 in earned income above the threshold.
InsuranceNewsNet
Senior Editor John Hilton has covered business and other beats in more than 20
years of daily journalism. John may be reached at john.hilton@innfeedback.com.
Follow him on Twitter @INNJohnH.
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