It’s that time of year when we start to see less money in the bank account and more food in our bellies! For those of you who are at the golden age of retirement, your bank account may not be as empty because the Social Security Administration has announced the increases to benefits for 2020.
Each year the administration announces a Cost-of-Living Adjustment and is based on the Consumer Price Index. What does that mean for you? Generally speaking, the adjustment means more money from benefits, but it may be more complicated than that. Below is a breakdown of each of these changes so you know what to expect and look forward to.
- 6% increase in benefits for nearly $69 Million: The Social Security Administration has announced that a 1.6 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 63 million Social Security beneficiaries in January 2020. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2019. (Note: some people receive both Social Security and SSI benefits)
- Maximum Wages Subject to Social Security Tax: The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $137,700. This is up $4,800 from last year’s maximum of $132,900. With this increase, it will help to capture more tax and replenish the fund so that those who need benefits will have access to them.
- Limit to benefits before Age 66: Individuals who are over age 62 and not yet 66 can begin to receive benefits from Social Security but those benefits are limited based on the person’s earnings. If someone is older than 62 and not turning 66 in a given year the earnings limit has been increased to $18,240 meaning that If a person earns over this amount the benefits will be reduced by $1 for every $2 over. For those who are turning 66 in a given year, the limit in 2020 was increased to $48,600 with $1 being deducted from benefits for each $3 earned over $48,600 until the month they turn 66.
The Social Security benefits system can be complicated at times so if you are getting close to retirement make sure you talk with a Henry+Horne tax professional so that you are taking advantage of this great system.