In 2020, recipients of Social Security retirement benefits and Supplemental Security Income benefits received a modest cost-of-living (COLA) increase of 1.6%. That increases the average worker’s 2020 monthly benefit by $24 per month and makes the maximum benefit amount $3,011 per month.
Additionally, the Social Security tax rate for employees in 2020 is 7.65%, which combines 6.20% for Social Security and 1.45% for Medicare. Individuals who earn more than $200,000 pay an additional Medicare tax of 0.9%. Any earnings above $137,700 are not subject to any additional Social Security tax, however.
The monetary valuation for work credits also increased in 2020. Now, in order to earn a single Social Security work credit, you must earn $1,410. That amount represents an increase of $50 from the value of a work credit in 2019.
Social Security Disability Insurance (SSDI) payments increased in 2020 as well. The maximum monthly benefit amount for legally blind individuals is now $2,110; the maximum monthly benefit amount for individuals who are not legally blind is now $1,260.
Although the above changes apply in 2020, there are changes that will now automatically go into effect every January, thanks to the Securing Every Community for Retirement Enhancement (SECURE) Act that Congress passed in December 2019.
Under the SECURE Act, individuals who will turn 70½ after 2019 will be able to delay taking required minimum distributions from their retirement accounts until they turn 72 years old.
Furthermore, the full retirement age (FRA) will increase by two months to 66 years and 8 months for people born in 1958. So, if you were born in 1958 and want to take 100% of your retirement benefits, you need to wait until you are 66 years and 8 months old. The FRA will increase by another two months in 2021 and again in 2022, until FRA becomes 67 years old for anyone born in 1960 or later.
You might wonder why Congress keeps pushing back the full retirement age for Americans who have been ready to retire for years. That is because the Social Security and Medicare trust funds will be depleted by 2035. Without any additional sources of funding, starting in 2035, beneficiaries will only receive 75% of the actual benefits to which they are entitled.