COST OF LIVING INCREASES (COLA)
Social Security has announced that there will be annual COLA for 2020 of 1.6%. Last year, 2019, the COLA was 2.8%. All Social Security recipients — whether on one’s own retirement benefit, a spousal benefit, a divorced spousal benefit, a widow or widower benefit will receive this 1.6% increase. Even those who have not started Social Security will have that 1.6% COLA built into their benefit amount.
MAXIMUM EARNINGS THAT ARE SUBJECT TO SOCIAL SECURITY (FICA) TAXES
One pays Social Security (FICA) taxes on earnings up to a certain amount. For 2019, that earnings limit max was $132,900 — meaning that if you earned more than that amount, you did not pay FICA taxes on the amount over $132,900. For 2020, that earnings limit amount will be raised to $137,700.
EARNINGS TEST LIMIT
If one starts Social Security benefits before they reach their Full Retirement Age and continue to work, the Social Security Earnings Test Limit comes into play. Note that the Earnings Test Limit only applies to those who are below their Full Retirement Age. Once you reach your Full Retirement Age, Social Security does not care how much you earn from working and those earnings will not affect your Social Security statement.
If below your Full Retirement Age and are still working, for 2019 you could only earn up to $17,640. That amount has been changed for 2020 to $18,240. If one earns more than that amount and is collecting Social Security benefits, that Social Security will be reduced by $1 for every $2 over the limit.
However, in the YEAR (note – THE YEAR) one turns his/her Full Retirement Age, the Earning Test Limit rises to $46,920 in 2019. In 2020, that limit rises to $48,600. AND VERY IMPORTANTLY, your Social Security benefit would \WHEN ONE REACHES HIS/HER FULL RETIREMENT AGE, THERE IS NO EARNINGS TEST LIMIT. SO, ONE COULD COLLECT SOCIAL SECURITY AND WORK, MAKING AS MUCH MONEY AS ONE CAN AND THEIR IS NO SOCIAL SECURITY REDUCTION. There are other nuances to the Earning Test Limit. Please consult with your financial advisor for more information.