Social Security Retirement benefits are set to increase by 1.6% in 2020. A modest 1.6% increase adds an extra $24 per month to for the average retired worker’s retirement check. Retired couples will see their combined benefits grow to $40 per month. This cost of living (COLA) increase is one of the smallest over the past twenty years. It will help offset 2020’s increasing Medicare Part B and Part D premiums.
However, the most significant changes happening to Social Security retirement in 2020 will be the increasing social security payroll taxes (FICA) for workers and the increasing age for full retirement benefits. Here’s what you need to know:
Social Security tax on wages will increase by 3.6% in 2020. The maximum amount of wage earnings ($137,700) subject to the increase. In addition, the maximum Social Security tax paid per worker in 2020 will be $17,074.80. Self-employed individuals will continue to pay both parts of their social security tax payment. Why the increase? The boost bases off the Consumer Price Index and a different index measuring wage growth; both trigger increases in the tax.
The Full Retirement Age increases by two months to 66 years and eight months to receive ‘full retirement benefits’ and not a decreased monthly payment. This increase in age for full benefits is only the tenth time in eighty-five years that the full benefits age has increased. The full retirement age will change again to age 67 years in 2022 for those born in 1960 and later.
Both of these changes in increasing tax collection and raising the benefits age are not enough to offset a deficit in the system from increasing longevity and the disparity of taxes from fewer American workers paying SSI taxes due to a declining population. When Social Security retirement benefits started, the life expectancy of a male worker born in 1940 was 60.8 years for men, and 65.2 years for women. As of 2017, the life expectancy for a baby born in the U.S. was 78.6 years.
The decision to start taking Social Security Retirement benefits or delay payments until one’s full retirement age can make the difference in thousands of dollars over a lifetime:
Together we can decide if waiting to take full retirement benefits is in your best interest. Assessing your benefits and retirement savings is the only way to determine what is best for you. It’s imperative to gather accurate information before making a final and unchangeable decision regarding benefits.
Additional Disclosure: This article is not endorsed or approved by the Social Security Office or any other Government agency.
Additional Disclosure: These are the opinions of the author and not necessarily those of the Registered Investment Adviser or Broker/Dealer, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.
In conclusion, at Lakeview Financial Solutions we truly enjoy helping people make smart financial decisions. In addition, we look forward to learning more about you, your priorities, and your goals. Contact us today to discuss your retirement strategy.