2020 has brought some changes to Social Security payroll taxes and benefits, as well as a new commissioner. Andrew M. Saul was sworn in as commissioner in June, promising to institute improvements in customer service.
Higher payroll taxes
Higher-income workers will pay more Social Security taxes in 2020. The maximum taxable wage base increased by $4,800, from $132,900 in 2019 to $137,700 in 2020.
This means workers earning $137,700 or more will see their FICA taxes increase by $367 this year. Self-employed individuals will see their FICA taxes increase twice that much. Workers earning less than the taxable maximum amount will not see a change in their FICA contributions.
A 1.6% cost-of-living adjustment will boost Social Security benefits for those already collecting. The maximum benefit for those retiring at their full retirement age this year will rise to $3,011 a month, an increase of $150 per month from the 2019 maximum benefit.
Increased deductions for Medicare premiums will offset some of the COLA hike. The standard Part B premium for outpatient services, which is usually deducted directly from Social Security benefits, increased by 6.7%.
Higher earnings limit
Social Security beneficiaries under full retirement age who continue to work can earn more money in 2020 than they could last year before losing any benefits to the earnings cap. Beneficiaries who are under full retirement age for the entire year can earn up to $18,240 this year without losing any benefits, $600 more than in 2019. If they earn more than that, they will forfeit $1 in benefits for every $2 earned over that limit.
Someone who reaches full retirement age in 2020 can earn up to $48,600 without losing any benefits, up $1,680 from last year. Benefits are reduced by $1 for every $3 earned over that limit. The earnings cap disappears at full retirement age and any benefits lost due to excess earnings would be restored in the form of larger monthly benefits.
If you have any questions about how these changes impact you specifically, do not hesitate to reach out to your Pathway advisor.
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