Changes To Social Security You Need To Know For 2020

An estimated 61 million people collect Social Security benefits -- for many it is the only source of retirement income.

Changes are to the Social Security Administration pension program are an annual event and 2020 is no different. Some changes are due to formulas, while others are part of the legislative framework underpinning Social Security.

Here are six changes announced by the SSA last month:

Benefits are increasing. Seniors are getting a raise, but unfortunately, not as big of one as this year. The annual cost-of-living adjustment is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers and is 1.6% for 2020.

Seniors received a 2.2% increase this year. The COLA is designed to keep pace with inflation, not necessarily exceed it.

"The average of all Social Security recipients together, the average of their monthly increases is going to equate to about $24 a month," said Brian Doherty, author of the 2015 book, Getting Paid To Wait – Bigger Social Security Benefits the Simple and Easy Way.

A higher monthly maximum payout. According to the SSA, the maximum monthly benefit at full retirement age will increase by $150 a month to $3,011.

To hit Social Security's maximum monthly benefit, a worker would need to have hit or surpassed the maximum taxable earnings cap for 35 years. SSA takes your 35 highest-earning, inflation-adjusted years when calculating your retired worker benefit.

Retirement age continues to increase. The full retirement age will increase next year by two months to 66 years and eight months for persons born in 1958. Anyone born before 1954 or earlier has a full retirement age of 66. But for those born after that, the full retirement age increases in two-month increments and stops with those born in 1960.

Anyone born in 1960 and later has a full retirement age of 67.

The earnings cap rises. As it stands, once you surpass $132,900 in earnings, you no longer have to pay FICA taxes, which fund Social Security. That earning cap is increasing to $137,700 next year.

"That only effects wealthy people and it’s only about 6% of all wage earners in this country that have earnings that exceed that earnings cap," Doherty explained. "So 94% of people pay those FICA taxes on all their earnings."

Disability benefits increased. While primarily a retirement pension program, Social Security also provides a monthly benefit to 8.4 million disabled workers, and about 1.6 million spouses and children of disabled workers. Those recipients are getting an increase as well.

Non-blind SSDI recipients can get a $40 monthly bump to $1,260, while blind SSDI beneficiaries can take home $70 more extra a month ($2,110 per month).

Early filers can earn more. Social Security recipients who take benefits early but keep working will be able to earn a little bit more in 2020.

Filers who will not hit full retirement in 2020 are allowed to earn $18,240 ($1,520 a month) without any withholding -- up $50 a month from 2019. After $18,240, however, the SSA can withhold $1 in benefits for every $2 in earned income.

Filers who reach full retirement age in 2020 are allowed to earn $48,600 ($4,050 a month) before any withholding, an increase of $140 a month from 2019. SSA will take $1 in benefits for every $3 in earned income above the threshold.