Social Security is one of America’s most valuable social resources. Out of the 50 million individuals benefiting from the monthly payouts, over a third are lifted out of poverty with at least 15 million of them being retired workers.
Social security is a dynamic program. In the tenth month of every year, the social security administration releases its fact sheet, which is an update on everything social security. These include the amount payable to beneficiaries in the coming year and the requirement to qualify for a benefit.
If you are looking to have social security as your primary source of income after retirement, then you need to keep up with its yearly changes.
Read on to find out more about the changes expected in 2020.
- Adjustments in the Cost of Living
All American citizens, especially the beneficiaries of social security, look forward to the Cost-Of-Living Adjustment (COLA) announcement in October of every year. COLA measures
the inflation faced by social security recipients to determine how much more they’ll get in the following year.
Due to low inflation, the yearly social security COLA is expected to be at 1.8% in 2020 – a percentile reduction from 2019’s 2.8% COLA. The increase is not significant, but for all beneficiaries who solely depend on social security, it is a welcomed change. For the average retired American, the increase equates to about 25$ per month.
- Increased Taxation on Your Social Security
Even with a sparse COLA in 2020, retirees will still be subject to income taxes on some part of their social security benefits. The portion of your benefits that are taxed will depend on your household income levels.
Individuals earning $25,000 or more will have 50% of their income taxed. For married couples, the total amount ranges between $32,000 and $44,000.
- An Increase in the Full Age of Retirement.
The very legislation that allowed the taxation of social security benefits has also increased the full retirement age from 65 years to 67 years. People who will turn 62 in 2020 will still have access to their social security benefits, but with reduced monthly payouts. They will have to wait until they are at least 66 years and eight months to claim 100% of their security benefit.
- Dipping Into the Social Security Funds
In 2020, Social Security will start paying out more in benefits than it receives in revenue. Since 1983 when the trust funds were set up, this is the first time payout is more than income
Over the past 35 years, the social security trust fund has accumulated at least 2.8 trillion dollars in excess trust fund revenue.
So, unless Congress takes action, the trust fund will be depleted by 2034, meaning that social security will only be able to pay less than 80% of the agreed benefits from the current FICA taxes.
- End of the File-and-Suspend Social Security Maximization Strategy.
File and suspend was a maximization plan of action that allowed married couples to delay their retirement credits but still receive full spousal benefits (great for lower-earning couples). Unfortunately, young Americans can no longer access this perk.
President Barrack Obama signed the Bipartisan Budget Act of 2015 in November that year. The new laws were primarily against this strategy, and they stated that retirement benefits could not go up past the age of 70.
- No More Spousal Benefit Strategy
The other change implemented by Congress in 2015 is the removal of the spousal benefit strategy. The legislation prevents individuals who reach full retirement age in 2020, and after from filing restricted claims for spousal benefits.
The strategy allowed people to claim half of their spouse’s full retirement benefit amount as their benefits earned the delayed retirement credits until they reach 70.
On the bright side, the spousal benefit strategy is still available to people born in 1953 or earlier.