There are some big changes to the Social Security program coming in 2020. If you are about to start collecting benefits or are currently receiving benefits, we have detailed below how the five (5) Social Security Changes in 2020 may affect how much in benefits you receive.
This Post about Social Security changes in 2020 will cover:
- 2020 COLA Increase
- Will there be a COLA Increase for 2021?
- Why the Full Retirement Age is going up
- There will be an Increase in Maximum Benefits Amount
- How to get the maximum Social Security benefit
- Social Security FAQs
Social Security Changes In 2020 You Should Know About
The Social Security Administration announced several changes that start in 2020 that might affect you.
For a detailed list of those changes, see our article on Social Security COLA increase for 2020 and more.
Here is the summary of the 2020 Social Security changes:
1. COLA Increase
A 1.6% increase in Social Security benefit payments. The increase will begin with benefits that Social Security beneficiaries receive in January 2020.
Increased SSI payments will begin on December 31, 2019.
Will there be a COLA Increase for 2021?
The Social Security Administration will announce the 2021 COLA increase in October 2020.
Here’s what you should know.
If there is an increase for 2021, it will be paid starting in January 2021. Increases for SSI payments will begin on December 31, 2020.
We will keep you updated when the COLA increase is announced.
While we don’t know what the increase will be, here’s a history of COLA for the last 10 years.
As you can see, there’s been an increase every year for the last 10 years except in 2016.
Social Security COLA History
Here’s a look at COLA increases since 2011.
2020: 1.6%
2019: 2.8%
2018: 2%
2017: 0.3%
2016: No increase.
2015: 1.7%
2014: 1.5%
2013: 1.7%
2012: 1.7%
2011: 3.6%
2. Full Retirement Age Goes Up
Full Retirement Age (FRA) increases for anyone born in 1958 will be 66 and 8 months — a two-month increase.
The full retirement age will increase by two months in 2021 and again in 2022. By 2022, it will be age 67 for anyone born in 1960 or later.
What is the Full Social Security Retirement Age?
Your full retirement age (FRA) is the age at which you are eligible to receive 100% of your Social Security retirement benefit.
The full retirement age used to be 65 for those born in 1937 or earlier.
However, in 1983, Congress passed a law to increase the retirement age to 67 over a 22-year period (for those reaching age 62 between 2000 and 2022).
The FRA will reach 67 for workers born in 1960 or later – who become eligible for retirement benefits at age 62 in 2022 or later.
See the table below for the full retirement age based on your year of birth.
| Year of Birth | Full Retirement Age |
| 1937 or earlier | 65 |
| 1938 | 65 and 2 months |
| 1939 | 65 and 4 months |
| 1940 | 65 and 6 months |
| 1941 | 65 and 8 months |
| 1942 | 65 and 10 months |
| 1943-1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 and later | 67 |
3. Increase in Maximum Benefits
The maximum Social Security benefit an individual can receive depends on the age at which the person retires.
The amount declines if you start collecting Social Security Benefits before your full retirement age, while someone who delays retirement until age 70 can collect a higher monthly benefit.
According to the Social Security Administration (SSA) the maximum monthly Social Security benefit that an individual who files a claim for Social Security retirement benefits in 2020 is:
$3,770 for someone who files at age 70.
$2,861 for someone who files at full retirement age (currently 66).
$2,209 for someone who files at 62.
For comparison, the average Social Security retirement benefit in 2019 is $1,461 a month while the average Social Security disability benefit is $1,234.
How Do I Get the maximum Social Security benefit?
Here are the 3 steps you can take to get the maximum social security benefit:
Delay Receiving Benefits
Social Security retirement benefits increase by roughly 7% each year that you delay between the earliest age at which you can claim benefits – 62, and your full retirement age.
The full retirement age is currently 66 and rising to 67 for people born in 1960 and later. Most people are better off delaying.
Many financial planners encourage their clients to tap other resources, such as retirement funds, if that allows them to start collecting Social Security benefits closer to their full retirement age.
Work Longer
Social Security is based on a worker’s 35 highest-earning years. You may be able to boost your benefit by working longer if you’ll earn enough to replace one of your lower-paid years with a higher-paid one.
People who took time off to raise families or otherwise had breaks in their employment could find working longer to be especially helpful in increasing their benefit.
Earn more
Another way to increase your future Social Security check is to earn the maximum income for as many years as you can.
Earning the maximum income in 2020 means you’ve earned $137,700 or more, which is the maximum amount of income subject to the 6.2% Social Security payroll tax.
If you earn the maximum income in all 35 of your highest-earning years, you’ll qualify for the maximum Social Security benefit at your full retirement age.
4. The Earnings Cap Increases
Most workers pay 6.2 percent of their earnings into the Social Security system and employers match this amount.
Self-employed workers contribute 12.4 percent of their paychecks.
However, there is a limit on taxable income for Social Security tax purposes. This is called the earning cap.
The earnings cap is essentially the maximum amount of earned income that is taxed for Social Security. In 2020, the cap will rise by $4,800 to $137,700.
5. Social Security Wage Limit Increases
When you start collecting Social Security benefits, you can still work while collecting your benefits.
However, if you haven’t reached your full retirement age, part or all of your Social Security payments could be temporarily withheld.
In 2020, you’re allowed to earn $18,240 ($1,520 a month) without any withholding if you haven’t hit your full retirement age.
When you reach the $18,240 threshold, the SSA can withhold $1 in benefits for every $2 in earned income above the limit.
Social Security FAQs
Here are some of the most commonly asked Social Security benefits questions by our readers.
Who is eligible for Social Security Benefits?
To qualify for Social Security retirement benefits, you need to earn at least 40 Social Security credits.
The number of work credits you need to get retirement benefits depends on your date of birth.
If you were born in 1929 or later, you need 40 credits (10 years of work).
However, people born before 1929 need fewer than 40 credits.
For a detailed explanation of how Social Security benefits are calculated, see our post on How are Social Security Benefits Calculated?
Can I work and collect Social Security benefits?
Yes, you can continue to work while you are collecting your benefit.
However, your monthly benefit amount could initially be reduced, depending on when you started collecting benefits and how close you are to your full retirement age (FRA).
Once you reach your FRA, your benefits will no longer be reduced if you continue to work.
For more on this topic and the best time to start collecting Social Security benefits, see our article on FRA.
Are Social Security benefits taxed?
How much of your Social Security is taxed depends on how much income you have from other sources in addition to your benefits.
If you have other sources of retirement income, such as a 401(k), wages from a part-time job, royalties or rental income, then you should expect to pay income taxes on your Social Security benefits.
However, if your only source of income is your Social Security benefits, then you probably won’t pay taxes on your Social Security Benefits.
For our taxable Social Security calculator, click here.
Do I have to pay state taxes on Social Security?
Many retirees are surprised to learn that they can end up having to pay federal income tax on their Social Security benefits.
As explained in detail here, the federal government taxes up to 85% of your benefits, depending on your income.
In addition, some states also require residents to pay state income tax on their Social Security Benefits.
However, 37 states do not tax Social Security benefits. To see the full list of the 37 states without Social Security taxes, click here.
Social Security Changes in 2020 Summary
We hope this post on the Social Security Changes in 2020 was helpful.
If you have further questions about Social Security retirement benefits, please let us know in the comments section below.
Be sure to check out our other articles on Social Security including Social Security Full Retirement Age, Schedule of Social Security benefit payments 2020.
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