The Social Security Administration recently announced the Cost-of-Living Adjustment (COLA) for Social Security benefits in 2020. Starting January 2020 Social Security beneficiaries will receive a 1.6% increase in benefits, which is 1.2% lower than last year’s increase of 2.8%. This will result in an average increase of $24 per month for the average retiree.
For many Social Security beneficiaries, the 2020 COLA will be less than the increase in Medicare premiums which may cause their net benefit to decrease.
In addition, the Social Security wage base will increase from $132,900 to $137,700. The Social Security wage base is the maximum amount of wages subject to the 6.20% Social Security tax that is paid by employees with their employers contributing an equal amount. The 1.45% Medicare tax, on the other hand, applies to all wages.
The earnings limit for workers younger than full retirement age (FRA) will also increase from $17,640 to $18,240. What this means is if you start collecting Social Security benefits prior to your FRA while still working, your benefits may be reduced if your earnings exceed $18,240 for the year (SSA deducts $1 from benefits for each $2 earned over $18,240).