Social Security in 2020 is shaping up to be a case of The Good, The Bad, and The Ugly:
- Recipients receive a monthly 1.6% cost-of-living adjustment (COLA).
- It now takes $1,410 to earn a Social Security credit, up $50 from 2019.
- Social Security benefits will be a political point of contention this year.
The 1.6% increase for 2020 is a 43% decrease compared to last year’s 2.8% COLA. The average SS recipient will see $24 more each month – $1,503 vs. $1,479. For couples, the monthly benefit is up to $2,531 from $2,491, an increase of $40.
Also, full retirement age – a retired worker can collect 100% of their monthly benefit – increases by 2 months to 66 years and 8 months for those born in 1958. This year marks the 10th time since Social Security became law in 1935 that the normal retirement age has increased.
(Note: Full retirement age again will increase by 2 months in 2021 and 2022, plateauing at 67 for people born in 1960 or after.)
If you receive a payout between age 62 – the first age of eligibility for retired worker benefits – and 66 years and 7 months, you face a permanent reduction in monthly payout.
Now, to earn a Social Security retired worker benefit (including disability, survivor’s insurance protection), you will need 40 lifetime work credits. You can receive – based on income – up to four each year. These credits are earned based on your income in a given year.
In 2019, $1,360 equaled one lifetime work credit; a year’s worth of credits (4 X $1,360) worked out to $5,440 in earned income. This year, a work credit requires $1,410, an increase of $50 per credit or $200 annually, in earned income ($5,640).
One program to understand is Supplemental Security Income. SSI –funded by tax revenues (not Social Security taxes) – is a federal income supplement. SSI helps aged, blind, and disabled people with little or no income; and provides cash to address needs for clothing, food, and shelter.
Still, benefits – Social Security, Medicaid, and food stamps – will be front and center for the upcoming budget discussions. President Donald Trump’s fiscal 2021 budget includes cuts to the Social Security program, reductions targeted for programs that benefit about 8.5 million disabled workers.
A recent Transamerica survey revealed that 48% of workers say their greatest retirement fear is that Social Security benefits will be reduced or that SS will not exist in the future. Also, paying off debt was the most No. 1 financial priority (66%), with credit card debt most cited (43%).
Your quality of life should not be tied to Social Security; you’ve earned much more than that while putting in the work. If you’re looking ahead to retirement (and who isn’t?) and need expert advice to building a secure, debt-free future, reach out to start the conversation.