Social Security recipients will get a 1.6 percent cost-of-living adjustment (COLA) in their monthly benefits starting in January. The average individual retired Social Security beneficiary is expected to see a monthly benefit jump from $1,479 to $1,503, an increase of roughly $24 per month or $288 for the year.
Estimated average Social Security retirement benefits starting January 2020
- All retired workers in 2019 = $1,479/mo
- All retired workers in 2020 = $1,503/mo
Did you know? You can increase your Social Security retirement benefits by 5-8% when you delay applying until your age 70.
1.6% cost of living adjustment for Social Security retirement benefits and SSI payments begins with the December 2019 benefits (payable in January 2020)
The 2020 maximum Social Security retirement benefits a worker retiring at full retirement age is $3,011/mo.
Did you know…
- 87% of Baby Boomers are expecting Social Security to be a source of their retirement income.
- 1-3 people expect it to be their primary source of income.
- Social Security pays benefits to more than 67 million people including retirees, children, and surviving spouses.
2020 Social Security and Medicare tax rates
If you work for someone else…
- your employer pays 7.65%
- you pay 7.65%
If you’re self-employed…
- you pay 15.3%
Note: The above tax rates are a combination of 6.2% Social Security and 1.45% for Medicare. There is also 0.9% Medicare wages surtax for those with wages above $200,000 single ($250,000 joint filers) that are not reflected in these figures.
|Maximum amount you can pay in Social Security taxes|
|2019: $8,239.80||2020: $8,537.40|
- 165+ million people work and pay Social Security taxes.
- Social Security has provided financial protection for Americans since 1935.
|Maximum earnings amount Social Security will tax at 6.2%|
|2019: $132,900||2020: $137,700|
How does Social Security work?
- When you work, you pay taxes into Social Security.
- The Social Security Administration used your tax money to pay benefits to people right now.
- Any unused money goes to the Social Security trust funds.
- Later on, when you retire, you receive benefits.
Social Security payments explained
SS Social Security retirement benefits are for people who have “paid into” the Social Security system through taxable income.
SSD or SSDI Social Security Disability (SSD or SSDI) benefits are for people who have disabilities but have “paid into” the Social Security system through taxable income.
SSI Supplemental Security Income (SSI) benefits are for adults and children who have disabilities, plus limited income and resources.
|Maximum SSI payments||2019||2020|
Here’s how to qualify for your retirement benefits
When you work and pay Social Security taxes, you earn “credits” toward Social Security benefits. The number of credits you need to get retirement benefits depends on when you were born.
If you were born in 1929 or later, you need 40 credits (10 years of work) to receive Social Security retirement benefits.
The earnings needed for a credit in 2020 is $1,410.
4 credits maximum per year.
Did you know you can check your benefits status before you retire?
You can check online by creating a ‘My Social Security account‘ on the SSA website. If you don’t have an account, you’ll be mailed a paper Social Security statement 3 months before your 61st birthday.
It shows your year-by-year earnings, and estimates of retirement, survivors and disability benefits you and your family may be able to receive now and in the future.
If it doesn’t show earnings from a state or local government employer, contact them. The work may not have been covered either by a Section 218 agreement or by federal law.
Sources: SSA.gov, 17th Annual Retirement Survey, Transamerica Center for Retirement Studies®
Get Expert Tax Advice
There’s a lot to think about when it comes to tax planning. That’s why it often makes sense to talk to a tax professional who can evaluate your situation and help you determine if any year-end moves make sense for you.