A new year often brings slight changes to some of America’s most popular programs, and Social Security is no exception.
The amount each beneficiary should expect to receive in 2020 will be slightly higher (like many years), after inflation adjustments. And taxes may affect different swaths of the population.
The program is an important piece of many people’s retirement plans, as 10,000 baby boomers turn age 65 each day in the U.S.
Bolstering the program has become a focus on Capitol Hill since Social Security’s reserve funds are expected to be depleted in 2035, at which time the program will no longer be able to pay out benefits in full.
But in 2020, here’s a look at some of the changes that may affect you:
Cost of living adjustment
The Social Security Administration announced in October that benefits would increase by 1.6 percent in 2020.
For a recipient earning $1,479, the average monthly benefit among all retired workers, checks will increase to about $1,503 per month.
Cost-of-living adjustments, which began in 1975, are implemented in order to counteract the effects of inflation.
The maximum Social Security benefit for a worker retiring at full retirement age will rise to $3,011 per month in 2020, from $2,861 per month last year.
For employees, the tax rate remains stable at 7.65 percent (a combined rate for Social Security and Medicare).
Maximum taxable earnings in 2020 increased to $137,700, from $132,900 in 2019.
Earnings above that level are not subject to the tax.
Retirement earnings test exempt amounts
The retirement earnings test applies to those who claim Social Security while still working. The test takes two main factors into account: your age and income.
In one scenario, the retirement earnings test withholds benefits before you reach full retirement age if your income exceeds a certain threshold – and then adds them back once you reach full retirement age.
That threshold amount for 2020 is $18,240.
A higher threshold applies to those will reach full retirement age during the year. For 2020 it is $48,600. The program withholds $1 in benefits for every $2 of earnings in excess of the lower exemption amount, and $1 for every $3 in excess of the higher exemption amount.
Full retirement age is 66 for people born in 1943 through 1954. It is 67 for those born in 1960 or later.
Source: Fox Business