If you are currently collecting Social Security benefits, or you plan to start collecting in the near future, you should know that benefits and requirements usually change every year. In 2020, the Social Security Administration has made a few adjustments to the program, and if you’re depending on those benefits to have enough income in retirement, you’ll need to consider them carefully. Here are some of the most significant changes to Social Security benefits in 2020:
Cost of Living Adjustment
There’s some good news for those who collect their Social Security benefits on a monthly basis: you’re getting a COLA! No, we’re not talking about a can of soda; we’re talking about more money you can use to take care of your expenses. This year’s cost of living adjustment amounts to 1.6%, for a monthly benefit increase of about $288 for the average Social Security recipient.
Raising the Full Retirement Age
If you were planning on collecting 100% of your monthly benefit this year, you may not be able to do it as soon as you thought. The full retirement age has been raised to 66 years and eight months for anyone born in 1958. If you try to collect your benefits before you reach that age, it could mean a significant decrease in your retirement income, so it’s a good idea to wait if you can afford to do so. You should also be aware that more increases are on the way. The full retirement age will increase by two months in 2021, and two more months in 2022, making it 67 years old for anyone born in 1960 or later.
Changes to Payroll Tax
Even if you’re nowhere close to retirement age, changes to Social Security can affect you. For instance, the previous threshold for being subject to payroll tax was an annual salary of $132,900. That means any income made over that amount would not be subject to payroll tax. This year, the threshold has been raised to $137,700, amounting to added payroll tax up to $297.60 over the course of 2020.
Higher Caps on Benefits
In 2019, Social Security’s monthly benefit payout was capped at $2,861, regardless of your income during your working years. For 2020, the payout amount has been raised by $150 per month for a total of $3,011. It may not seem like much, but for someone at full retirement age, that’s an additional $1,800 per year for those who have earned enough income during their career to reach the highest benefit amount.
Of course, Social Security is much too complex to be broken down into a few bullet points. While the changes listed above represent some of the most significant changes to the program, there are a few more adjustments that have been made. If Social Security benefits are going to be part of your retirement plan – and they should be – it just makes sense to speak to a qualified retirement planner about your goals. Visit https://www.CrashProofRetirement.com to get in touch with a retirement planner in the Philadelphia area, or visit the “Events” page to sign up for the next Crash Proof Retirement® educational event!