Watch Out for These Big Changes to Social Security in 2020
Social Security costs are said to exceed incomes in 2020, and for the very first time since 1982, compelling the program to reach into it’s $3 trillion trust fund for just covering benefits. Without changes, Social Security beneficiaries will get about 80% of their scheduled benefits, by 2035.
Social Security benefits worth $1 trillion was paid out to nearly 63 million people in 2018 and surge to 80 million by 2028. Recipients are living longer while slow population growth signifies less younger workers to pay for the system, since Social Security is established on payroll taxes. The issue of less new workers is made worse by the Trump administration’s efforts to curb legal immigration.
Future benefits may suffer and Social Security checks may be slashed 21% by 2034. The payroll tax, divided between workers and employers, will rise from its current 12.4% to 14.8% over the next 24 years and be imposed on workers earning more than $400,000 a year. Now, the maximum earnings subject to the Social Security payroll tax is $132,900. As the bill proposes to tax earnings beyond $400,000, it would leave a big gap. Around 40 million retired workers in the United States depend on Social Security and 62% retirees count Social Security as half of their monthly income. As policies and the economy reshape Social Security, a list of some changes by 2020, are given:
Increase in retirement age
The Reagan Administration was the one to approve a Social Security reform which gradually increased the age of retirement from 66, and added another year, making it 67 years due to increase in our longevity. From 2017 to 2022, an additional two months is added to retirement age each year. By 2020, the full retirement age will be 66 years and eight months.
This would change if Social Security benefits are completely vested. If a retiree wishes to receive Social Security benefits between the age 62 to 60 days before fully vested, there is permanent reduction in pay-out. But applying 30 days after reaching retirement age, you secure over 100% of your Social Security benefits.
Getting benefits is harder
Social Security is not automatic and many people do not qualify. By the time you’re eligible to enrol, you must amass 40 work credits. Every year that you stay employed, you earn 4 lifetime work credits, so you have to work 10 years to be eligible for full benefits. A single lifetime work credit is amassed for every $1,320 you earn and to secure maximum credit during a year, you have to earn minimum $5,280.While not difficult to earn even working part-time, this base number will go up in 2020, as workers must earn a minimum of $5,400 annually to merit the full work credits.
Spousal benefits end
Earlier, married couples applied for a non-working or unemployed husband/wife’s Social Security benefits when they reached retirement age, and delayed their own retirement, allowing individual benefits to grow in value. A married couple can apply to receive spousal Social Security, where one spouse received payments, just as the other applies and then holds the payments to earn regular pay-out increases.
Now you will not be eligible for spousal Social Security, if your individual Social Security pay-out exceeds your spousal Social Security benefits. This either-or policy does not apply to Survivor Social Security benefits as widows and widowers receive spousal Social Security benefits, separate from their personal retirement benefits.
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