As December presses on, 2019 is quickly coming to a close. The end of the year ushers in a new one and with it a number of changes, fresh starts, and updates. Even the Social Security system cannot escape the onslaught of revisions as several important numbers for federal retirees will be changing in 2020. Let’s walk through exactly what will be happening in the new year regarding Social Security updates.
Social Security Earnings Test on the Rise
The Social Security Earnings Test simply means that prior to reaching full retirement age (FRA) for Social Security — note that this is not the same as FERS minimum retirement age — your Social Security benefit will be reduced if you make above a certain amount in yearly income. For 2020, the Social Security Earnings Test is $18,240. In essence, if you draw Social Security before full retirement age and make more than $18,240, your Social Security benefit will be reduced by $1 for every $2 you make over the limit.
However, there is a three-for-one special in the year that you turn FRA. The year you reach your FRA, the Social Security Earnings Test applies only to earnings for the months prior to your birthday and the annual earnings test limit is increased to $48,600. This means that for every three dollars you go over the limit, one dollar will be withheld.
See the chart below to determine your FRA.
Once you reach your FRA, the earnings test disappears, and you are free to earn as much or as little as you like without worrying that it will have a negative effect on your Social Security benefit. Remember that you can always delay the receipt of Social Security until your FRA or when you stop working, whichever comes first.
Below is a summary of the Earnings Test limits for 2020.
COLA Increases for 2020
Those already drawing Social Security will be glad to know that they will receive a 1.6 percent cost-of-living adjustment (COLA) in 2020. Cost-of-living adjustments are based on the Consumer Price Index (CPI-W) and are given to help combat the effects of inflation on Social Security benefits.
For more on Social Security updates in 2020, see SSA’s 2020 Fact Sheet.
Social Security and your Retirement Plan
Social Security is an important piece of the retirement pie for federal employees. Knowing the rules and regulations surrounding Social Security is vital to smoothly executing the transition from employment to retirement. There is a wealth of good information out there; however, keeping track of Social Security updates can be a tough task. This means researching topics yourself, or speaking with individuals who have done the research for you.
