Every year the Social Security Administration looks at the cost of living to adjust monthly benefits. This guide will highlight the changes for 2020 as well as provide some strategies to maximize your benefit.
Based on the increase in Consumer Price Index (CPI) from the third quarter in 2018 to the third quarter in 2019, Social Security beneficiaries will receive a 1.6% increase for the year 2020. So, a retired individual receiving a benefit of $2,100/month in 2019 would see their benefit grow to $2,133.60/month.
Earnings Test Change
If you are receiving benefits before your full retirement age and are still earning income your benefits may be reduced. The threshold for earned income is rising form $17,640/year in 2019 to $18,240/year in 2020. For every $2 earned over that threshold, your benefit will be reduced by $1. Keep in mind that there is no earnings test once you reach full retirement age.
Maximum benefit increase
The maximum benefit you can receive at full retirement age has risen from $2,861 to $3,011. Your benefit can still increase beyond this amount for every year you wait after full retirement age.
Ways to Maximize
If you are younger than 66 as of January 2nd, 2020 you are no longer eligible for the “restricted application” or “file and suspend strategies”. The doing away with these leaves the rest of us with limited options when it comes to maximizing our lifetime benefit. Nevertheless, there are still some things you can do.
Use a Social Security Calculator
Our SS calculator considers your expected benefits along with some assumptions to help generate a customized claiming strategy that would maximize your lifetime benefit. All you need is the information from your SS statements which are mailed to you or can be found online. Our calculator can be found here.
Increase your Earning Years
Your Social Security benefit is calculated using the average of your 35 highest-earning years. Years with zero or little earnings can significantly impact your average. It is important to take this into account when preparing for a retirement date. For instance, if you have only had earnings in the last 34 years there will be zero added to calculate your average earnings. Working just one more year to replace that zero can go a long way in increasing your monthly benefit.
Consider Delaying Benefits
One of the few remaining ways that is guaranteed to increase your benefit is waiting. Taking your Social Security before full retirement age will result in a reduced benefit. On the other side, every year that you delay claiming after full retirement age will increase your payment by 8% up until age 70. However, since many people rely on Social Security after they retire it can make waiting difficult. It can always help to speak with an advisor when weighing your claiming options.
Don’t forget Spousal Benefits
If you are married and your benefit is less than 50% of your spouses, you may be eligible for spousal benefits. This means that when you file you will receive your benefit and a spousal benefit to make your overall payment half of your spouses.
Look at The Big Picture
Social Security is just one part of the puzzle and should be used to supplement other sources of retirement income. Before deciding on when you are going to claim benefits you need to take your entire situation into account. What other sources of income do you have? How much can you draw annually from your investments? How long do you expect to live? Answering these questions should give you a better idea of how social security will fit into your overall retirement income plan.
There is no one way to take your social security as everyone’s situation is unique. Factors like life expectancy, other income, and asset levels will all play a factor in deciding. Your goal should be to maximize your benefit in a way that best fits your overall retirement plan. If you need help, we would be happy to sit down with you. Just give us a call at 610-825-3540, or use our Speak to an advisor button.