10 Changes Coming to Social Security in 2020

Social Security Cards

There are some changes coming to Social Security next year that you need to be made aware of. Keep reading to learn more.

10. Full Retirement Age Has Increased

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Once again the Social Security program’s full retirement age is set to increase. In 2020, the full retirement age will increase to 66 years and eight months for people born in 1958. For people born in 1960 or later, it will increase to 67. This is the tenth time the full retirement age has increased since Social Security was signed into law in 1935.

Keep in mind that this doesn’t mean you can’t retire before then. It just means that you won’t be able to collect your full monthly benefit if you do. According to the Social Security Administration, workers who retire as early as 62 may risk losing as much as 30 percent of their benefit.

9. All Your Benefits Could be Suspended

Stop Payment
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Under the new law, if you voluntarily suspend benefit payments at your full retirement age in order to earn higher benefits for delaying, other benefits payable on your record will be suspended as well. Even benefits not on your record, for example, spousal benefits, will be suspended also. So, why are they doing it this way? Well, according to the Social Security Administration, “there is less rationale for paying dependents if the primary worker has not retired or is not receiving payment from Social Security. It also preserves the fairness of the incentives to delay, so that couples cannot simultaneously receive a benefit and get a bonus for delaying.”

As with every rule, there are some exceptions. For example, if you are a divorced spouse, you can continue receiving a divorced spousal benefit even if your ex-spouse voluntarily suspends their retirement benefit.

8. More of Your Social Security Will be Taxed

Income Tax
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The exact amount of your Social Security benefits that can be taxed is determined by your household income levels. That being said, up to 50 percent of your benefits will be taxed if your income is between $25,000 and $34,000 as an individual. Married couples will have up to 50 percent of their benefits taxed if their combined income is between $32,000 to $44,000. For individuals with an income of more than $34,000, up to 85 percent of their benefits may be taxed. And, for married couples with a combined income of more than $44,000, up to 85 percent of their benefits may be taxed.

NOTE: Your state of residence can also affect how much of your Social Security benefits are considered taxable. Right now, 27 states (soon to be 28 as Iowa is expected to join the list this year) and the District of Columbia don’t tax Social Security income.

7. Earnings Limits Will Increase

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For those of you who may not know, the Social Security Administration deducts $1 from your benefits for every $2 you earn if you still work while receiving monthly Social Security benefits. The amount you are able to earn before the agency deducts any money from you will increase in 2020. Workers between the ages of 62 and 66 will be able to earn up to $18,240 ($1,520 per month) — up from $17,640. In the year you turn full retirement age, you will be able to earn $48,600 ($4,050 per month) — up from $46,920 — before the agency deducts $1 for every $3 you earn until the month you reach full retirement age. Once you reach full retirement age, the earnings limit will disappear.

6. There Will be a Cost of Living Adjustment

Cost Of Living
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The Social Security Administration announced in October an annual cost-of-living adjustment (COLA). As a result, about 69 million Americans will see a 1.6 percent increase in their Social Security benefits in 2020. Supplemental Security Income (SSI) benefit amounts will increase as well. If you’re curious about your new benefit amount, the agency will post Social Security COLA notices online in December 2019. NOTE: You have to sign up for an account and log in to your account in order to view your benefit information.

5. Upper-Income Workers Will Owe Extra

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According to The Motley Fool, all earned income between $0.01 and $132,900 is subject to Social Security’s 12.4 percent payroll tax. This means that upper-income working American will owe up to $595.20 extra if self-employed or $297.60 extra if employed by someone else in 2020. Why? Because the earnings tax cap rises in-step with the National Average Wage Index each year. And, the payroll tax on earned income generated more than 88 percent of the $1 trillion in revenue collected by the program in 2018.

4. Earnings Required for Credits Will Increase

Source: Credits.com

Just being born and working in the United States doesn’t automatically make you eligible for Social Security retirement benefits. You have to earn a certain amount of “credits” in order to qualify. These credits are earned through years of working. That being said, you will need to accumulate at least 40 credits during your lifetime in order to receive Social Security benefits. And, now the Social Security Administration has upped the earnings required for you to receive one credit. It will rise from $1,360 this year to $1,410 in 2020.

3. Disability Income Thresholds Will Increase

Disabled Worker
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Yes, Social Security provides benefits for retired workers, but it also provides monthly benefits for disabled workers plus the spouses and children of disabled workers as well. And, there’s a set amount of money disabled workers can earn before having their benefits stopped. That amount is going to increase by $40 to $1,260 per month for non-blind SSDI recipients in 2020. That number is up from $1,220 per month in 2019. Likewise, blind SSDI recipients will also see an increase. They will be able to earn $2,110 per month in 2020, up from $2,040 in 2019.

2. There Will be a Higher Maximum Monthly Payout

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Social Security retired worker benefits are capped at a certain level. That level will increase in 2020 by $150 a month to $3,011. In 2019, retired workers at full retirement age could not take home more than $2,861 a month. So, why is there a cap on these monthly benefits? Because there’s also a cap on the amount of earned income that the payroll tax can impact.

FYI, to reach the maximum monthly payout amount, you would have had to reached or surpassed the maximum payroll tax cap for 35 years.

1. The Annual Tax Cap on Workers’ Income Will Increase

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According to Money Talks News, the maximum amount of a worker’s income that is subject to Social Security payroll taxes will increase to $137,700 in 2020 — up from $132,900 in 2019. That might not make much of a difference depending on your situation. For example, workers who earn more than $137,700 next year won’t have to worry about owing payroll taxes on every dollar they earn.

FYI, the payroll rate tax paid by workers will remain at 6.2 percent for employees and 12.4 percent for the self-employed.


Your turn! Tell us about any other changes to Social Security that you’re aware of.