Mary Beth Franklin, Investment News 10/10/19 – The Social Security Administration announced Thursday that benefits and the maximum amount of wages subject to payroll taxes will increase by 1.6% in 2020, more than a full percentage point less than the 2.8% cost-of-living adjustment posted this year. It marks the smallest annual increase in Social Security benefits and payroll taxes since 2017, when the COLA was 0.3%.
The 1.6% COLA will begin with benefits payable to Social Security beneficiaries in January.
A 1.6% COLA in 2020 would boost the average Social Security retirement benefit by about $32 to $1,503 in 2020. That’s significantly less than in 2019, when the average Social Security retirement benefit increased by $39, to $1,461 per month.
A 1.6% COLA in 2020 would also increase the maximum retirement benefit, currently $2,861 per month, by about $150 per month to $3,011 for someone who retires at full retirement age in 2020. That compares to the $73 per month increase in the maximum retirement benefit in 2019 over the previous year.
The average and maximum Social Security benefits do not include delayed retirement credits. Social Security recipients who delay claiming benefits beyond full retirement age earn an additional 8% per year for every year they postpone benefits up to age 70. Those who retire before full retirement age receive reduced benefits for the rest of their life.
Social Security benefits increase automatically if the CPI-W, which measures price inflation for urban workers, increases in the third quarter (July, August and September) of the current year over the third quarter of the previous year. The 1.6% COLA in 2020 follows a 2.8% increase in 2019, a 2.0% hike in 2018 and a meager 0.3% COLA posted in 2017. There was no COLA in 2016.
The 1.6% COLA for 2020 also affects how much beneficiaries can earn from a job without jeopardizing any of their benefits if they claim Social Security before their full retirement age.
To view the full article as published on Investment News please click here.