5 Possible Changes to Social Security Benefits in 2020 The SSA pays retirement benefits and disability benefits, the latter based on a medical record analysis. Here are 5 changes to the program in 2020.
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Social security benefit programs are designed to provide a solid financial foundation for the nation’s disabled and retired workers. Social security disability benefits paid to disabled workers based on medical record analysis get automatically converted to retirement benefits once the beneficiary reaches full retirement age. Around 45 million retired workers that make up 70% of all beneficiaries, receive a benefit check every month. The majority of these seniors depend on their social security payout for at least half of their income. Therefore any changes and updates made to social security benefits are highly significant for those receiving the benefits. Usually, any such changes to the program are announced during the second week of October every year. So, what are the expected changes for the year 2020 which the SSA (Social Security Administration) would announce in October this year? Here is a compilation by Sean Williams in his Motley Fool article. •
Increase in COLA (Cost-of-Living Adjustment): According to the Senior Citizens League, a nonpartisan group advocating for seniors, the COLA for 2020 is projected at 1.7%. As a result, the average retired worker can expect an increase of about $25 a month, based on the average payout of $1,471 a month as of June 2019. The COLA is the most significant figure in the SSA’s October announcement, and is a means of the SSA quantifying how much inflation its beneficiaries had to deal with in the current year and how much the benefits will rise in the coming year to compensate for this inflation.
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Increase in maximum monthly benefits: A retired worker who has earned a good amount of money on an annual basis over his/her working career may be able to enjoy an increase in monthly benefits in 2020. Social Security has placed a limit on the maximum monthly payout at full retirement age. In the year 2019, no one at their full retirement age can take home more than $2,861 per month, regardless of the millions of dollars they may have made each year throughout their working career. However, it is expected that in 2020, well-to-do beneficiaries who had reached the maximum taxable earnings cap in each of their 35 accounted years of work would receive a bit more than $2,861 a month.
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Early filers could see a rise in withholding thresholds: Early filers signify those who file for benefits before reaching their full retirement age. Such claimants who have not yet reached their full retirement age but are receiving benefits, will be subject to a Retirement Earnings Test. This test allows early filers to earn up to a certain amount of money before the SSA is allowed to withhold a portion or all of their benefit. Beneficiaries who won’t reach their full retirement age in 2019 will
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have $1 withheld for every $2 in earnings above $17,640 ($1,470 a month). Those who will reach their full retirement age in 2019 but have yet to do so, are allowed to earn $46,920 before the SSA starts withholding $1 for every $3 in earnings above this threshold. In years where COLA is positive, the income thresholds when withholding begins would rise modestly. •
Disability income thresholds may increase: Over 10 million people receive SSDI (Social Security Disability Insurance) each month and among these 8.5 million are disabled workers and the rest spouses and children of these disabled workers. SSDI beneficiaries are not allowed to earn more than a certain amount of income per month. In 2019, a disabled beneficiary can earn up to $1,220 a month. Beneficiaries who are legally blind can earn up to $2,040 a month. These two figures rose $40 a month and $70 a month respectively, from the year 2018. Since the average CPI-W reading increases on a year-over-year basis from the previous year, the SSDI income thresholds for the disabled and legally blind should increase modestly in 2020.
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Wealthy workers may have to pay more into Social Security: The payroll tax on earned income provides the maximum income to the social security benefits program. In 2018, this was $885 billion out of $1 trillion. This payroll tax of 12.4% is affixed on earned income between $0.01 and $132,900 in 2019; the upper limit is known as the payroll tax cap. The payroll tax cap adjusts annually according to the National Average Wage Index except in years where deflation occurs. Since the COLA seems positive in 2020, the payroll tax cap may increase next year. This won’t have a major impact on the large majority of the workforce because most workers do not earn $132,900 or more a year. However, those earning more than that may have to pay a bit more into the program in 2020. The cap may rise to $135,000 to $136,000.
Social security attorneys, providers of medical review services that support attorneys in reviewing disability cases, and social security beneficiaries have to stay updated on the periodic changes the SSA announces to their welfare program.
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