The sun peaking through the clouds.

Social Security Forecast: Changes Are Partly Sunny

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.

How Important Is Social Security to Me?

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


Social Security Changes for 2020

1. Partly Cloudy: Slight Cost of Living Increase

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.

2. Sunny: Maximum Benefits Go Up

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.

3. Sunny: Make More Money Without Raining on Benefits

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.

What's My 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

BEFORE FRA:

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.

AT FRA AND OLDER:

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.


4. Partly Sunny: Full Retirement Age Rising

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.

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 

5. Cloudy: Will Social Security Last?

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.

Make Social Security Part of Your Plan

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.

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