Will the maximum social security benefit be increasing in 2020?
There is some good news and some bad news for workers near the top of the Social Security payroll tax levels. For 2019, the top-level is $132,900 or more. The bad news is that more of your income will get hit with Social Security taxes in 2020. The good news is that it will increase the maximum Social Security benefit you can potentially receive in retirement.
Yes, the Maximum Social Security Benefits Will Increase in 2020
There is a cap on the amount of your income that counts towards your future Social Security benefits. Once you reach an income of $132,900 or more (for 2019), you will no longer be paying Social Security payroll taxes on additional income. That means billionaires, like Bill Gates or Jeffrey Bezos, won’t be getting any more from Social Security than someone who is making a low six-figure income.
Currently, at full retirement age, likely 67 depending on when you were born, your Social Security benefit will top out at $2,861 per month. That’s assuming you’re retiring now. It will likely be higher down the road for younger workers.
If you start Social Security benefits after full retirement age, you can get even more money per month. By delaying until age 70, the maximum Social Security benefit increases to $3,547 per month. Again, that’s assuming you’re retiring now.
Related: Why You Should Ignore Retirement Plans
If you have not yet retired, take the time to get a free Social Security Estimate.
How to Estimate Your Social Security Benefits
The amount of Social Security benefits you receive will be based on your work history. You can get a free estimate of your future benefits on the Social Security Administration site.
Keep in mind that the maximum Social Security benefit, at full retirement age, translated into $34,332 per year. Depending on your individual circumstances and which region of the country you’re living, that figure may or may not be enough. After some of my previous posts, it was brought to my attention that some of you could live quite comfortably on that amount of income. If that is you, I’m happy to know that you will have the income you need to be comfortable throughout your retirement.
Related: Big Changes Coming to Social Security For 2020
You may be disappointed to find out that Social Security Benefits will likely be taxable for many … [+]
Are Social Security Benefits Taxable?
I would be remiss if I didn’t point out that Social Security benefits are taxable at certain income levels. For married couples, taxes kick in at adjusted gross incomes of more than $32,000. You don’t need to be living rich to get your Social Security benefits taxed in retirement.
Will Social Security Benefits Increase Once You Retire?
The good news is that once you retire, your Social Security benefits can still grow a bit over time. But, don’t expect a miraculous jump in benefits. We are talking small cost-of-living adjustments, which are tied to inflation. For 2020, the Social Security Administration has announced a 1.6% cost-of-living adjustment.
Social Security will be a big part of many Americans’ retirement plans. However, it was never meant to be the only source of retirement income. Work with an independent financial planner to develop a strategy to help you maintain your standard of living in retirement. The sooner you get started, the easier it will be to achieve financial freedom.