The Social Security Administration has announced the following changes for the coming year.
- For those who are collecting benefits, benefit amounts will increase by 1.6% as a cost of living adjustment. The adjustment will be reflected in a recipient’s December benefit which is paid in January 2020.
- In 2020, the Full Retirement Age (age when a recipient can collect 100% of their benefit amount) is increased to age 66 and 8 months for those born in 1958, in 2021, it will increase to 66 and 10 months for those born in 1959 and in 2022, it will increase to age 67 for those born in 1960 and thereafter. In other words, 2020 is the last year that people turning 66 will have reached Full Retirement Age. In 2021 and thereafter, the Full Retirement Age increases by 2 months per year until 2026 when it reaches age 67.
- In 2020, the maximum monthly benefit amount at Full Retirement Age will increase from $2,861/mo to $3,011/mo. The maximum monthly benefit that can be collected for someone who files at age 70 is $3,790 and for someone who files at age 62 is $2,265.
- In 2020, earned income that is subject to social security’s payroll tax of 12.4% increases from $132,900 to $137,700. For those that are employed by someone else, typically the worker pays half the tax (6.2%) and the company pays half the tax (6.2%). For self-employed individuals, they are responsible for the full 12.4%. FICA refers to both payroll tax and Medicare tax – the Medicare tax is paid on all earnings and remains unchanged for 2020.
- In 2020, for those collecting Social Security Disability benefits, earned income can be as high as $1,260 for non-blind recipients and $2,110 for blind recipients without benefits being impacted. This is up from $1,220 and $2,040, respectively, in 2019.
- If you choose to collect benefits prior to your Full Retirement Age, you are limited to how much you can earn before benefits will be withheld. Once you hit Full Retirement Age, there are no income limitations (although there are some rules to be aware if you reach FRA in 2020 and had chosen to collect early). If you chose to collect early, in 2019, you could earn $18,190/year ($1,516/mo) before benefits would begin to be withheld; in 2020, that amount is increased to $18,240 ($1,520/mo).
Please feel free to call us if you have any questions about the latest changes to social security for 2020.