The changes include higher payroll taxes, larger benefits and a
promise of improved customer service
The
new year brings some changes to Social Security payroll taxes and benefits, as
well as a promise by the new Social Security Commissioner to improve customer
service in 2020.
Andrew
M. Saul was sworn in as Commissioner of Social Security in June, the first
Senate-confirmed head of the agency in more than six years. With a term running
through January 2025, Mr. Saul is responsible for administering the Social
Security retirement, disability and survivors’ insurance programs, which pay
over $1 trillion in benefits each year to about 64 million beneficiaries. The
agency has more than 63,000 employees nationwide.
In
an open letter to the public, Mr. Saul pledged to improve customer service this
year by hiring 1,100 new frontline employees to staff the agency’s crucial 800
number (800-772-1213).
In
addition, Social Security Administration field offices will resume full-day
operations on Wednesdays beginning Jan. 8. Field offices had closed at noon on
Wednesdays since 2012, when budget cutback curtailed service hours. Now, all
SSA field offices will be open from 9 a.m. to 4 p.m., Monday through Friday.
However,
the agency continues to urge the public to conduct as much business as possible
on line, including setting up personal accounts at www.socialsecurity.gov/myaccount to access their estimated benefits
statements and apply for retirement benefits.
Higher payroll taxes
Higher-income
workers will pay more Social Security taxes in 2020. The maximum taxable wage
base increased by $4,800, from $132,900 in 2019 to $137,700 in 2020.
Employers
and employees each contribute 7.65% of gross wages to fund Social Security
benefits and pay a portion of Medicare costs. Self-employed individuals pay
both the employer and employee share for a combined FICA tax rate of 15.3% of
net self-employment earnings.
As
a result of the higher taxable wage base, workers earning $137,700 or more will see
their FICA taxes increase by $367.20 to $10,534.05 this year. Self-employed
individuals will pay twice that much, up to $21,068.10 in FICA taxes in 2020.
Workers earning less than the taxable maximum amount will see not change in
their FICA contributions.
Bigger benefits
A 1.6% cost-of-living adjustment will boost maximum Social Security
benefits for someone retiring at their full retirement age this year to $3,011
a month, an increase of $150 per month from the 2019 maximum benefit. Average
retirement benefits will increase to $1,503 in 2020, up just $24 per month from
the previous year.
But
increased deductions for Medicare premiums will offset some of the COLA hike.
The standard Part B premium for outpatient services, which is usually deducted
directly from Social Security benefits, increased by $9.10 per month to $144.60
in 2020. That’s a 6.7% increase in the base Medicare premium.
Some
higher-income retirees pay even more for Medicare. Individuals whose modified
adjusted gross income exceeds $87,000 and married couples whose joint income
exceeds $174,000 are subject to monthly surcharges ranging from an additional
$57.80 to an additional $347 per month per person above the base premium in
2020. Medicare Part D prescription drug plans are also subject to high-income
surcharges.
Higher earnings limit
Social
Security beneficiaries under full retirement age who continue to work can earn
more money in 2020 than they could last year before losing any benefits to the
earnings cap. Beneficiaries who are under full retirement age for the entire
year can earn up to $18,240 this year without losing any benefits, $600 more
than in 2019. If they earn more than that, they would forfeit $1 in benefits
for every $2 earned over that limit.
Someone
who reaches full retirement age in 2020 can earn up to $48,600 without losing
any benefits, up $1,680 from last year. Benefits are reduced by $1 for every $3
earned over that limit. The earnings cap disappears at full retirement age and
any benefits lost due to excess earnings would be restored in the form of
larger monthly benefits.
Disappearing claiming strategies
Individuals
who reach full retirement age in 2020 and beyond will not be able to use any
creative claiming strategies to maximize their lifetime Social Security
benefits that were available to earlier cohorts of retirees.
People
who were born on are before Jan. 1, 1954, are still eligible to file a restricted claim for spousal benefits if they wait until age 66 or later to
claim Social Security, allowing them to collect half of their spouse’s or
ex-spouse’s full retirement age benefit amount while their own retirement
benefit continues to grow by 8% per year up until age 70. People born after
that date — including those who turn 66 this year — are not eligible to use
this claiming strategy.
This
year also marks the final phase out of another valuable claiming strategy. People who were 66 or older, and who
filed and suspended their benefits by the April 29, 2016, deadline, were able
to trigger dependent benefits for eligible family members while their own
retirement benefit continued to grow. Their retirement benefits will
automatically begin when they turn 70. This lucrative claiming option will be
relegated to the history books when the last group of eligible retirees turns
70 in April.
https://www.investmentnews.com/whats-new-for-social-security-in-2020-175859
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