Key Changes to Social Security in 2020

Social Security policies are updated yearly to better reflect the concerns of an aging nation. The federal government makes adjustments for the many retired or soon-to-retire workers who will rely on Social Security as a large portion of their income. What will the coming year bring for Social Security changes? Here are five things you should be aware of.

1. Full Retirement Age Will Go Up

If you were born in 1960 or after, the full retirement age has risen to 67. People in that age bracket can still begin to draw on Social Security Retirement Benefits when they turn 62, but they will receive lower monthly payments.

In 2019, the full retirement age for those born in 1955 and after is 66 years and two months. Benefits are also available at age 62, but the amount will be reduced in 2020 for those born in 1960 or after.

2. There Will Be a Cost of Living Adjustment

Social Security benefits adjust based on the cost of living. Right now, inflation is low, so the cost of living adjustment will be minimal. Still, it’s something.

The 2020 cost of living adjustment will be 1.6%. That works out to about $25 per month for lower earners all the way up to $50 per month for higher earners. That number is well below the 2.8% cost of living increase offered in 2019.

3. The Government Will Take More for Taxes

Your Social Security can be taxed, but not all of it. It is taxed based on a sliding scale depending how much income your household brings in. The government will only tax half of it if you make up to $34,000. But if you have a higher income, which many people do, up to 85% of it can be taxed.

4. The Maximum Social Security Benefits Will Increase

If you are at the top of the Social Security income scale, good news. 2020 will be a more lucrative year for you in terms of benefits. The maximum payout you can take home will rise, though not by a lot. The maximum allowed per month will go up to $2,861.

5. Supplemental Security Income Will Rise

Supplemental Security Income (SSI) is available to older people with disabilities and those who are blind. Monthly payments will rise for these people in 2020, though not by a lot. Individuals receiving SSI will get $12 more per month, while couples will receive $18 more.

If you are not sure about your monthly benefits or you have other concerns about your Social Security, you can view your monthly statements online by setting up an account. This will give a snapshot of your most current information and let you see how your benefits have changed from the previous year.

Understanding these 2020 changes for Social Security can help you advise your employees on what to expect. If you need assistance with other payroll issues, reach out to BCM Payroll Services, Inc. at 717-264-7374 to discuss your concerns.