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social security benefits cola 2020

While the exact details are still under wraps, Social Security recipients will be pleased to know that their benefits will be receiving a boost in 2020.

Every October, the Social Security Administration releases information regarding Cost-of-Living Adjustments to benefits. This year is no exception. On October 10th, the SSA will be releasing official details regarding the Cost-of-Living Adjustment that applies to 2020 Social Security payouts.

Expect an Social Security Benefits Boost of 1.6%

According to The Senior Citizen League, a nonpartisan group focused on senior issues, Social Security recipients will likely receive a 1.6% boost to their payouts, starting in 2020.

The league tracks data relating to how the SSA calculates its Cost-of-Living Adjustments. It bases their estimate on quarterly movements in the consumer price index for urban wage earners and clerical workers (CPI-W).

Mary Johnson, TSCL's Social Security policy analyst, mentions that this increase will be smaller than prior raises. She said that it “would raise an average retiree benefit by about $23.40 per month, a big drop from the $40.90 that people with that level of benefits received this year."

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900 pixels soho forum

Photo Credit: Reason.com and Soho Forum, Featured in Reason.com podcast, Source Link. Photo is strictly the intellectual property of its owner. All rights reserved.

Millions of retirees depend on Social Security benefits as a major income source. For many people, it's their primary income stream.

According to data from the Social Security Administration, and analysis by the Center on Budget and Policy Priorities, nearly two-thirds of elderly benefits recipients count on Social Security as their major cash income source.

But some news headlines in recent years have stirred public concerns about the program's future. Dour, and even alarmist, news coverage of reports by the program trustees led many onlookers to wonder about the program's solvency.

To help cut through lingering confusion, two economists participated in a public debate, hosted by the Soho Forum. Set up as an Oxford-style debate, the discussion tackled this resolution: "Given Social Security's nearly $3 trillion trust fund, the system cannot add to the federal deficit."

 

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claiming social security early cost

Sure, you can start your Social Security benefits at age 62. But is it better to claim early or delay benefits until a later date?

While a one-size-fits-all answer doesn’t work for everybody, a new study suggests that ill-timed Social Security strategies are costing Americans dearly.

United Income found that retirees might lose $3.4 trillion in potential income due to timing of when they enroll for their benefits. The research was a joint effort between the fintech company and former top policy officials from the Social Security Administration.

What about the income effect on retirees at a personal level?  On average, each retired household would miss out on $111,000 of lifetime benefits. And for current retirees, premature decisions could add up to collective losses of roughly $2.7 trillion.

That would average out to roughly $67,000 in lost income per household.

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social security benefits cola increase 2019

Good news, Social Security beneficiaries! Every year in mid-October, the Social Security Administration announces any cost-of-living adjustments to benefits – or “COLAs.” On October 12, the agency said that Social Security recipients would see a 2.8% COLA in 2019.

Until now, the 2018 cost-of-living adjustment had been the largest bump-up in benefits since 2012. What accounted for the heftier increase this year?

A rise in the cost of energy products, not to mention an increasing cost of shelter, were big inflationary contributors, according to experts. Both of those cost categories have heavy weightings within the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the Department of Labor index on which COLAs are based.   

For Social Security beneficiaries, the increased benefit payouts will start in January 2019. People receiving SSI benefits will see the increase on December 31, 2018.

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claiming social security early

For many soon-to-retire households, the timing of when to take Social Security benefits is an important choice. David Freitag, a Social Security expert with Mass Mutual, says that if you calculate the present value of a couple’s monthly benefits, it could exceed $1 million.

People are living longer and spending more. As a result, they need to know how their benefits really work, according to Freitag.

And it’s largely due to longevity risk, as the head of MassMutual in the U.S. explains: “This is not a retirement planning conversation. This is a longevity planning conversation, and near-retirees have the power and responsibility to ensure that they protect and receive every dollar they deserve in Social Security retirement benefits when the time comes.”

Even so, a large number of people take Social Security benefits before their full retirement age. In doing so, they may begin receiving income from Social Security sooner. But there are trade-offs, which vary depending on just how early you start benefits.

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how well you know social security matters

Guess what, class. The results are in… and most of us did not pass a very important test. Nearly half of Americans age 50+ failed a basic Social Security quiz, according to a newly released nationwide consumer poll by MassMutual Life Insurance Company.

Why should this news alarm us all? Because Social Security is a major income source for many Americans in retirement. And if we don’t know how to maximize our benefits, or even know what questions to ask regarding how to get our best payout, it can hurt us. We may be leaving money on the table when we need that income the most -- whether enjoying healthy income for your lifestyle or enjoying greater income certainty for monthly retirement expenses.

In some sense, it’s as if each point not scored is potentially a dollar amount of benefits we may lose, unless we start paying closer attention. It's time to consider how much in Social Security benefits we have accrued and start exploring strategies to maximize them.

"Getting Social Security right is critically important to inform plans for other income stream needs later in life as it may be difficult, and sometimes not even possible, to hit the reset button," said Mike Fanning, head of MassMutual, U.S. "This is not a retirement planning conversation. This is a longevity planning conversation, and near-retirees have the power and responsibility to ensure that they protect and receive every dollar they deserve in Social Security retirement benefits when the time comes."

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 social security earnings test question

Choosing when to take your Social Security benefits — whether that moment is before, at, or beyond your Full Retirement Age (or Normal Retirement Age) — could be one of the most important decisions you will make for your retirement income plan.

Why is knowing your Full Retirement Age (FRA) so critical? Claiming your Social Security benefits prior to reaching your FRA results in a reduction of your benefit, a reduction that lasts for your entire life. Since Social Security is likely to be the largest “income asset” for many people, understanding what could reduce that payout, and potentially how to avoid that reduction, is paramount.

It's not just that. If you are working and take Social Security benefits before attaining your Full Retirement Age, the Social Security Administration will also reduce your benefits payments should your earnings exceed certain limits. This is called the "Earnings Test" by the SSA and financial professionals. According to Transamerica Center for Retirement Studies, 53% of workers plan to work past 65, and 56% plan to work after they retire.

Given that lots of Americans have working plans for their retirement future, how could the Earnings Test affect their benefits payments? For one, it isn't clear to many people exactly what earnings apply toward the Earnings Test -- and therefore what could affect their benefits payouts. 

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