Social Security and Supplemental Security Income (SSI) benefits will rise by 1.6% in 2020, the Social Security Administration announced this week. That means the average benefit will climb about $24, to more than $1,483 a month.
The cost-of-living adjustment, or COLA, will begin with benefits payable to more than 63 million Social Security recipients in January 2020. Increased payments to more than 8 million SSI beneficiaries will begin on Dec. 31, 2019.
The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor's Bureau of Labor Statistics.
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax will increase to $137,700 from $132,900.
The earnings limit for workers who are younger than their full retirement age (age 66 for people born in 1943 through 1954) will increase to $18,240. Social Security deducts $1 from benefits for each $2 earned over the $18,240 limit. There is no limit on earnings for workers who are at their full retirement age or older for the entire year.
The Social Security Administration says that information about Medicare changes for 2020, when announced, will be available at Medicare.gov.
For Social Security beneficiaries receiving Medicare, Social Security will not be able to compute their new benefit amount until after the Medicare premium amounts for 2020 are announced. Final 2020 benefit amounts will be communicated to beneficiaries in December through the mailed COLA notice and the my Social Security account's message center.
Robert Powell writes in a recent Tip of the Week: If you haven't done so already, take a moment to sign up for a my Social Security account. As some know, the Social Security Administration no longer mails you a Social Security statement. The Social Security statement, among other things, provides a snapshot estimate of a worker's benefits at full retirement age, age 70, and age 62. Read more about how to sign up for a my Social Security account and statement benefits.
Got questions about the new tax law, Social Security, retirement and/or investments? Email Robert.Powell@TheStreet.com.