2020 Raise in Social Security Is Substantially Less than 2019's Increase
For many retired seniors their social security income is the main source of how bills, medical and and housing expenses are paid so we understand that every little bit counts. The cost of living adjustment announced by the Social Security Administration last month is substantially less than the increase in 2019 and much less than most predicted.
Social Security Administration Announces 2020 Raise in SSI
The Social Security Administration has announced a 1.6 percent increase in benefits in 2020, nearly half of the change in the previous year. The small rise has advocates questioning whether the government is using the proper method to calculate the cost of living for older Americans and those with disabilities.
How is the Social Security Raise Calculated?
Cost-of-living increases are tied to the consumer price index, and a modest upturn in inflation rates and gas prices means Social Security recipients will get only a small boost in 2020. The 1.6 percent increase is lower than last year’s 2.8 percent rise and the 2 percent increase in 2018. The average monthly benefit of $1,479 in 2019 will go up by $24 a month to $1,503 a month for an individual beneficiary, or $288 yearly.
The cost-of-living change also affects the maximum amount of earnings subject to the Social Security tax, which will grow from $132,900 to $137,700.
For 2020, the monthly federal Supplemental Security Income (SSI) payment standard will be $783 for an individual and $1,175 for a couple.
Could Consumer Price Index for Elderly be Better Index than Consumer Price Index for Urban Wage Earners and Clerical Workers?
The smaller increase may mean that additional income will be entirely eaten up by higher Medicare Part B premiums. The standard monthly premium for Medicare Part B enrollees is forecast to rise $8.80 a month to $144.30. According to USA Today, advocates are questioning the method used to calculate cost-of-living increases. The Bureau of Labor Statistics uses the Consumer Price Index for Urban Wage Earners and Clerical Workers to set the inflation rate. This method looks at prices for gasoline, electronics, and other items that younger workers rely on. The advocates suggest using a different index, the Consumer Price Index for Elderly, that puts greater emphasis on medical and housing expenses.
Most beneficiaries will be able to find out their cost-of-living adjustment (COLA) online by logging on to my Social Security in December 2019. While you will still receive your increase notice by mail, in the future you will be able to choose whether to receive your notice online instead of on paper.
For more on the 2020 Social Security benefit levels, click here.
Estate Planning & Long-Term Care Planning
When planning your estate it's common to plan for long term care, health costs and the income you can project from retirement accounts, Social Security Benefits, Veterans Aid & Attendance Benefits and other sources. At Joseph L. Motta we help you to consider cost of living, costs of long term care and various forms of income when taking a comprehensive look at your estate planning. Call 440-930-2826 to schedule a free consultation. We enjoy putting to use our knowledge and expertise to provide you with the best advice on how to protect the ones you love.