Social Security is the primary building block of retirement for most Americans. Each fall, the Social Security Administration (SSA) releases an annual report detailing changes for the upcoming year. Any changes to a program relied upon by so many are worth noting. Below are some of the most notable changes being announced for 2020.
Cost of Living Adjustment
Each year the Social Security Administration releases the cost-of-living adjustment, often referred to as COLA. This is the annual “raise” designed to help benefits keep up with inflation, and it’s tied to a consumer price index. For 2020, the COLA is at a 1.6% increase over last year.
Full Retirement Age Changes
The full retirement age (referred to as the “normal retirement age” by the Social Security Administration) is the age at which a retired worker can collect 100% of their monthly benefits. For 2020, the full retirement age will increase to 66 years and 8 months, a two-month increase. It will increase by two additional months each year for the next two years, ending in 2022 with a normal retirement age of 67. You may begin taking benefits anytime between age 62 and full retirement age but doing so will cause you to receive reduced monthly benefits.
Early Filer Earnings Thresholds Raised
For people who choose to begin taking benefits before they reach their full retirement age while remaining in the workforce, or early filers as they’re often referred to, there’s good news! The withholding thresholds have been raised for 2020.
In any year you won’t reach full retirement age, you can earn up to $18,240 (or $1,520 per month) before withholding begins. The SSA can withhold $1 in benefits for every $2 earned above the threshold. In the year you reach full retirement age, the earnings threshold is $48,600 (or $4,050 per month) before the SSA can begin withholding benefits, and in this case it’s only $1 of benefits for every $3 earned above the threshold. Once you reach full retirement age, these restrictions no longer apply, and any benefits withheld are returned in the form of higher monthly payouts.
Maximum Benefit and Taxable Income Caps Raised
For workers who are on the top of the Social Security income scale, the maximum monthly benefit is rising. The cap is being raised by $150 per month, from $2,861 in 2019 to $3,011 in 2020. To accommodate this, workers on the high end of the income scale will also see the maximum amount of earnings subject to the Social Security tax rise from $132,900 to $137,700.
Work Credit Earnings Requirement Rises
Work credits are the basis used by the SSA to determine who qualifies for benefits. Up to four credits can be earned in a single year, and in most cases a minimum of 40 credits are required to qualify. The amount of earned income required to receive one work credit will rise $50 in 2020. Luckily, the requirement is still relatively low at $1,410 of income, or $5,440 to receive the maximum of 4 credits annually.
Disability Income and Supplemental Security Income Changes
Social Security Disability Income (SSDI) beneficiaries can now earn more monthly income before their benefits cease. In 2020, a non-blind SSDI beneficiary can earn up to $1,250 per month before their benefits stop, while a blind SSDI beneficiary can earn up to $2,110 per month. This is an increase of $40 and $70, respectively.
Those who rely on Supplemental Security Income (SSI) will receive an increase in their monthly payment. In 2020, SSI benefits will rise by $12 per month for individuals or $18 per month for married couples.