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If you receive Social Security benefits of any kind, you are probably familiar with the Social Security Cost of Living Adjustment (COLA). Its purpose is to ensure your benefits keep pace with inflation. Whether it fully fulfills that purpose is the subject of some debate.

The Social Security Cost of Living Adjustment (COLA) for 2020 is 1.6%

Social Security rolls out new COLA information every year, and for the almost 63 million people receiving Social Security benefits and 8 million receiving Supplemental Security Income (SSI) benefits (note: some people receive both Social Security and SSI benefits) (per November 2019 figures), there will be a 1.6% cost-of-living increase in their benefit checks. You can read more about the 2020 Social Security Cost of Living Adjustment, tax, benefit and earning for 2020 by clicking here. You can compare the 2020 numbers with 2019 by clicking here.

More people qualify for benefits than ever

Social Security disability has helped more and more workers and their families replace lost income. Several factors have contributed to this increase, but here are the primary factors:

• Baby boomers (people born in 1946 through 1965) reached their most disability-prone years between 1990 and 2011
• More women have joined the workforce and have worked consistently enough to qualify for benefits if they become disabled

Despite the increase, the 9 million or so people getting Social Security disability benefits represent just a small subset of Americans living with disabilities.

(From: The Facts about Social Security’s Disability Program)

Disability payments are modest

At the beginning of 2019, Social Security paid an average monthly disability benefit of about $1,234 to all disabled workers. That is barely enough to keep a beneficiary above the 2018 poverty level ($12,140 annually). For many beneficiaries, their monthly disability payment represents most of their income. Still, these benefits can be a life-saver to those who cannot work due to disability.

(From: The Facts about Social Security’s Disability Program)

Other important COLA changes to note include increases across the board:

  • A Quarter of Coverage (also called a “Credit”) will increase from $1,360 to $1,410 per month. “You earn a quarter of coverage (QC)—also called a ‘credit’—for a certain amount of work covered under Social Security, but you may earn no more than 4 QCs per year. Generally, you need to be fully insured to receive Social Security benefits, but there may be other requirements.” See https://www.ssa.gov/oact/progdata/insured.html for more information on insured status requirements. Note: QCs also affect eligibility for Disability Insurance Benefits.
  • The estimated average Social Security benefits for a disabled worker, spouse and one or more children is $2,176 per month. The average Social Security benefit for a disabled worker individually is $1,258 per month.
  • If you are under full retirement age, you can now earn $18,240 per year (or $1,520 per month) before your income will start to reduce your monthly retirement benefits. One dollar in benefits will be withheld for every $2 in earnings above the limit.
  • If you reach full retirement age in 2020, you can earn up to $48,600 for the year, or $4,050 per month, for the months in the year prior to reaching full retirement age. There is no limit on earnings for workers who are full retirement age or older for the entire year. Wondering when you’ll reach full retirement age? Check out this useful web page: https://www.ssa.gov/planners/retire/retirechart.html.
  • The amount that Social Security considers to be “Substantial Gainful Activity” (SGA), which roughly means working, will increase from $1,120 per month to $1,260 per month (or $2,110 per month if you are blind). The threshold amount for a Trial Work Period (TWP) will also increase from $880 to $910 per month.
  • The maximum Social Security benefit for a worker retiring at full retirement age will increase to $3,011 per month, whereas the average monthly benefit for all retired workers is $1,503. That’s not a lot to live on.
  • The SSI Federal Payment Standard will increase to $783 per month for individuals and $1,175 per month for couples.

All of these increases were determined using the Consumer Price Index for Wage Earners and Clerical Workers (CPI-W) from the third quarter of last year. Essentially, the COLA will increase because there was a price increase in consumer goods.

If you have more Social Security questions or concerns about a Social Security claim, please contact us so we can give you the help you need.

Have a great New Year!