If you are one of the nearly 69 million Americans who receive social security benefits or extra income, you will notice a slight change in the monthly bill this year, says USA Today.
This month, more than 63 million beneficiaries will receive an adjustment in the cost of living 1.6%.
The average monthly benefit for all retirees this month will rise from 1479 to 1503 dollars. The average monthly benefit for couples receiving benefits will rise from to 2491 2531 dollars.
It’s one of many changes that can happen in 2020.
Here are some others:
Taxable income tax on social security
The maximum amount of earnings taxable for social security will increase from 132 900 dollars in 2019 137 to $ 700 in 2020. it Should be noted that this increase affects only 11.8 million of the 171 million workers covered by the social security system. But this increase, according to David Freitag, consultant, financial planner MassMutual, may be surprising for 7% of workers who in 2020 will have to pay into the social security system by about 298 dollars more than in 2019.
As reference: workers must pay 6.2 percent of their earnings to the maximum taxable amount in the social security system. And they have to pay the 1.45% of all their income to Fund Medicare. Your employer matches, up to the taxable maximum, these percentages a total of 15.3 percent. At the same time self-employed must pay 15.3 percent of their incomes in Federal payroll taxes also known as FICA — Federal tax on insurance premiums.
The only good news about this increase, you and your employer will not have to pay social security tax on incomes in excess of taxable maximum amount.
How work affects your benefits
If you work, receive social security benefits and you’re younger than full retirement age, your earnings may reduce the amount of the benefit. (Full retirement age is the age at which you are first entitled to full or partial pensions through the social security system).
For example, in 2020, the social security Administration will deduct $ 1 for every $ 2 earned over $ 18 $ 240.
However, the earnings limit for people who in 2020 will be 66 years old, will increase to 48 $ 600, and the social security administration (SSA) will deduct $ 1 from benefits for every $ 3 earned in excess of 48 $ 600, as long as the worker turns 66. Since 1955, each year of birth are added two months until the full retirement age reaches 67 years for people born in 1960 or later.
One positive thing: there is no limit on earnings for workers who are FRA (agreement on a future interest rate) or older throughout the year.
Social security and taxes
According to the SSA, a little more than half of Americans (56%) pay taxes on social security benefits. And this percentage is likely to increase, given that the thresholds of income tax for social security by law are not adjusted for inflation, according to Joseph Stenken, consultant on products for advanced markets in the Ameritas.
For individuals whose gross income ranges from $25 000 to $34 000, 50% of his social security benefits may be taxed. When income of more than 34 000 $ to 85% of benefits may be taxed.
And for those who submit a joint return and whose gross income ranges from 32 000 to 44 000 USD and up to 50% of benefits may be taxed. For incomes over $ 44,000, up to 85% of benefits may be taxed.
Bipartisan bill resignation, which President Donald trump signed at the end of last year, will also affect current and future beneficiaries, at least in several ways.
First, those who will turn 70 and a half years after 2019, you can defer receiving required minimum distributions or RMDS from their retirement accounts until they were 72 years old. RMD is typically the minimum amount a retirement account owner must withdraw annually.
And it can be mixed package for beneficiaries who are not spouses. Under such a beneficiary means a living person for which to calculate life expectancy and he/she is not the spouse of the owner of the retirement account.
In accordance with the old law, designated beneficiaries who are not spouses, can receive payments for your life. But now for many owners of retirement accounts, which will leave your life in 2020 and beyond, the beneficiaries will have only 10 years to clear the account.