Start your application now and choose your investments.
Free online investment help is just a click away.
By Al Chingren - First Quarter 2020
Many retirees count on Social Security checks for financial stability. If you haven't retired yet, it's a critical element for planning. In 2020, there are changes you should know about—most of which point to benefit increases. However, it's a mix of bright spots and clouds.
While the 1935 Congress may never have intended Social Security to be your ONLY retirement resource, it is an important source of income for many retirees. The 2020 changes aren't over-the-top but will likely be good news for the many Americans who receive benefits.
Source: Basic Fact Sheet, Social Security Administration, 2019
It's not the 2.8% increase retirees received in 2019, but the 2020 cost-of-living adjustment (COLA) of 1.6% is, at least, something. And it's intended to cover increased Medicare costs. For the average retiree, the increase means just under $25 more each month, and closer to $50 for higher wage earners.
The maximum wage cap limits the amount of your income that's subject to Social Security taxes. That limit increased in 2020 to $137,700—up from $132,900. The maximum monthly benefits limit, or how much you can collect, also increased to $3,011. This should be good news in retirement for workers who may be at the top of the income scale.
If you collect Social Security and work part-time, the amount you can earn without your benefit being reduced has been raised. How much depends on whether you've reached full retirement age (FRA)—the age at which you can receive100% of your benefits.
In 2020, your Social Security benefits won't be reduced if you earn $18,240 or less. Make more, and the Social Security Administration will withhold $1 from your check for every $2 you earn.
Full Retirement Age?
In 2020, it looks like this:
Year Born FRA
1958 66, 8 months
1959 66, 10 months
1960 67 and later
Source: SSA.gov , January 2020
If you reach FRA in 2020, earn up to $48,600 without getting dinged on your benefits. After that amount, Social Security will withhold $1 for every $3 you earn.
Full retirement age is now 67 for those who were born in 1960 and after—a slight increase to what it was before. For those born earlier, FRA is between 66 and 67 (see the chart). As always, taking your benefits before or after your FRA can affect how much you receive.
See the Difference if Your Full Retirement Age is 67
As of January 2020. Assumes Full Retirement Age is 67. Increased benefits for delaying Social Security max out at age 70. Source: www.ssa.gov .
Social Security benefits are administered from two federal trust funds. Projections show that revenue from the current trust fund will be depleted by the year 2035. This could result in Social Security being able to pay less than 80% of benefits from ongoing payroll taxes. Of course, that can change if Congress acts—and they typically do. They have various options, which include raising taxes or continuing to gradually increase the FRA (as they did this year), among others.
Whether you're taking Social Security now or will in the future, it's important to know how it fits in your plan for after you stop working.
Need help with your retirement plan? We can help.
The SECURE Act is here. Find out what the new rules mean for you—and your employees.
The end of March means the tax filing deadline of April 15 is quickly approaching. Don't miss your shot at contributing to an IRA for 2018.
March 5, 2019
Costs have increased, and even the elimination of the "donut hole" may not lower your expenses. Here's a look at the changes.
First Quarter 2020
Higher benefits and maximums offer a mixed outlook. Review our top five 2020 changes.
Now that some major retirement rules have changed, how does your own plan hold up? Here’s what to look for.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
American Century Investments is not responsible for and does not endorse any comments, content, advertising, products, advice, opinions, recommendations or other materials on or available directly or via hyperlinks from Facebook, Twitter or any third-party website. Facebook, Twitter and LinkedIn are registered trademarks of their respective owners.