Social Security Cost-of-Living Adjustment for 2020 Is 1.6%

[Perryinva]

Every little bit helps raise that PIA at FRA, now that I am retired & will be 62 next year, COLAs are my only source of increases after 2019 is factored in . Even only delaying until 67, 1.6% per year raises my PIA to $3370. I can live with that. Every year I can delay after that would then be $3235 more per year.

 

[joeea]

I’m just hoping SS still exists when I’m old enough to receive it.

It will exist.

There are many things to worry about - that's not one of them.

 

[gauss]

For those of us not collecting yet, when do they bump up the numbers in the estimated benefits page? When it becomes effective on the start of next year?

For those under age 60, the important figure is the change in the National Average Wage Index, as it is the inflation factor that is applied to the earnings history used in one's initial SS PIA calculation.

It was announced this month that the AWI has increased 3.62% over the prior year.

-gauss

 

[karen1972]

For those under age 60, the important figure is the change in the National Average Wage Index, as it is the inflation factor that is applied to the earnings history used in one's initial SS PIA calculation.

It was announced this month that the AWI has increased 3.62% over the prior year.

-gauss

YEH, I couldn't remember what it was called but knew it should be out soon. All those internships and overtime in my 20s are really paying off.

 

[wmc1000]

Just calculated the net increase in SS after the COLA and the Medicare increase for DW and I in 2020 rounding down to whole dollars - $40 per mo extra net increase is just under 1.2%

 

[teejayevans]

For those under age 60, the important figure is the change in the National Average Wage Index, as it is the inflation factor that is applied to the earnings history used in one's initial SS PIA calculation.

It was announced this month that the AWI has increased 3.62% over the prior year.

-gauss

Or at the age of 60, where it locked, and then the inflation factor starts being used.

 

[Perryinva]

The catch is that it gets locked at age 62, using age 60 numbers. So all subsequent years (if any) income has a 1.0 multiplier, and all the previous years pre age 60 get locked at age 62, with only COLA increasing the PIA for each year delayed. Makes any increase if you already have 35 years max, from further work income after 62 almost negligible. You end up paying in $10k to SS each year for no benefit increase.

 

[SecondCor521]

You end up paying in $10k to SS each year for no benefit increase.

Not if you retire early.

 

[Dtail]

The catch is that it gets locked at age 62, using age 60 numbers. So all subsequent years (if any) income has a 1.0 multiplier, and all the previous years pre age 60 get locked at age 62, with only COLA increasing the PIA for each year delayed. Makes any increase if you already have 35 years max, from further work income after 62 almost negligible. You end up paying in $10k to SS each year for no benefit increase.

Yes after more reading, this is my understanding too. Not reaching 60 y.o. until next year, so

 

[gauss]

Not if you retire early.

+1
In all seriousness, being beyond the second bend point, SS wise , played into my decision to RE. Not leaving much on the table by doing this.

 

[Independent]

I'd be happier with a 0% CPI increase and a 0% SS increase.

 

[Independent]

The catch is that it gets locked at age 62, using age 60 numbers. So all subsequent years (if any) income has a 1.0 multiplier, and all the previous years pre age 60 get locked at age 62, with only COLA increasing the PIA for each year delayed. Makes any increase if you already have 35 years max, from further work income after 62 almost negligible. You end up paying in $10k to SS each year for no benefit increase.

This assumes that your indexed wages from 35 years ago equal your current wage at age 62 (or 63 etc). This wasn't even close for me. IF I had continued to work after 62, I would have been replacing earlier years by significant amounts.

(But, I was already FI, so why bother with working?)

 

[HFWR]

I recall quite a few w*rking years when 1.6% would have been an improvement...

 

[martyb]

I'll find something to do with my $75 a month raise.

 

[ascenzm]

And a large chunk of that will get eaten up by the projected increase in Medicare premiums of $8.80/month

The one advantage of being younger than 65 and collecting Social Security. I'll get the entire 1.6% increase.

Hurray.

 

[Midpack]

Knowing “the Social Security program is running out of money with benefits on track to be reduced by around 2035 unless Congress steps in,” I find it hard to understand why some would complain about how much or little any annual Soc Sec COL increase might be. And yes, I paid in all my working years just like most everyone else here.

I also agree the outlook for Medicare is a bigger concern. There are lots of “causes” but much higher underlying costs are at the root of it, and ultimately campaign finance. Something will have to give, presumably before Soc Sec gets into trouble.

Within 16 years from now, we’ll look back and realize benefits were relatively good in 2019...

 

[Gearhead Jim]

The Feds need to look at why medical care is so much more expensive than other 1st world countries. That is the big problem. Not insurance. Alas, our elected reps seem to have no interest in doing so. I wonder why? :sarcasm:

Our older daughter moved to England about 18 months ago for her job. The stories she tells us about the British healthcare system were both hilarious and pathetic. A colleague's wife works a medium-high position in pharmacy with NHS. This woman gives only one bit of advice: "Don't get sick in this country."

Our system could be a lot cheaper, but the British system seems like a poor template to follow.

 

[Midpack]

Our older daughter moved to England about 18 months ago for her job. The stories she tells us about the British healthcare system were both hilarious and pathetic. A colleague's wife works a medium-high position in pharmacy with NHS. This woman gives only one bit of advice: "Don't get sick in this country."

Our system could be a lot cheaper, but the British system seems like a poor template to follow.

Might be, but what one woman told your daughter is anecdotal at best. The U.K. system and many others beat the US system in all established metrics, at about half the cost on average. Healthcare is way more expensive in the US with higher infant mortality and lower longevity. Only Americans in very good health or those covered by generous corporate benefits think the US “system” is worth defending.

 

[timo2]

Might be, but what one woman told your daughter is anecdotal at best. The U.K. system and many others beat the US system in all established metrics, at about half the cost on average. Healthcare is way more expensive in the US with higher infant mortality and lower longevity. Only Americans in very good health or those covered by generous corporate benefits think the US “system” is worth defending.

The health of the 'herd' is much better in other countries with universal health care. There will always be poor fits to the system, and these exceptions suffer so the overall population has better minimum health. The USA system seems to be good for the exceptions, but poor for the 'herd'. and everyone can not be 'exceptional'. When everyone is 'exceptional', no one is exceptional. IMO.

 

[Budatx]

Social Security Question - WEP - Years of Substantial Earnings

Question regarding WEP's impact on Social Security and my Years of Substantial Earnings.

I currently have 28 years of substantial earnings; 30 years wipes away WEP impact. I can reach 29 years, by working until the end of May 2020, and 30 years by working until May 2021. I'll be 64 in two months, and my SS FRA is 66 and 2 months. I have a pension and fully paid retiree health insurance, and work only to complete the 30 years of substantial earnings. I also contribute the max to a 401k at current job. I plan to draw SS at FRA. My question: solely from a WEP impact perspective, and not considering the increase in SS payments from continuing to work, is it worth it for me to continue working only to reach 29, or 30, years of substantial earnings? Will either of those milestones make a significant difference in SS payments, as opposed to 28 years? Thanks!

 

[nate2953]

The first bend point is $0-960 for 2020. If you have 30 YOCs or no non-covered pension you get 90% of 960. If you have 29 YOCs you get 85% of 960. If you have 28 YOCs you get 80% and so on.

 

[timo2]

Question regarding WEP's impact on Social Security and my Years of Substantial Earnings.

I currently have 28 years of substantial earnings; 30 years wipes away WEP impact. I can reach 29 years, by working until the end of May 2020, and 30 years by working until May 2021. I'll be 64 in two months, and my SS FRA is 66 and 2 months. I have a pension and fully paid retiree health insurance, and work only to complete the 30 years of substantial earnings. I also contribute the max to a 401k at current job. I plan to draw SS at FRA. My question: solely from a WEP impact perspective, and not considering the increase in SS payments from continuing to work, is it worth it for me to continue working only to reach 29, or 30, years of substantial earnings? Will either of those milestones make a significant difference in SS payments, as opposed to 28 years? Thanks!

DW is subject to WEP, so I've educated myself on it as much as I could. WEP and GPO are very corrosive to your SS benefits. If you can avoid them entirely, that it is worth it IMO. In my research, I found the website 'maximize my social security' had the best evaluation of WEP and GPO effects on my wifes situation. I paid the $40.00 for one year to use their program, and for me it was worth it.
https://maximizemysocialsecurity.com/

 

[67walkon]

I have a maybe silly question. I postponed SS until 70, although I did claim a spousal benefit. I just turned 70.

Is the 1.6% COLA based on the actual amount I get at age 70 or is it 1.6% of my fra amount? I've never been clear on that.

 

[Perryinva]

COLA increases are always applied to your PIA, (primary insurance amount) which is your amount at FRA, calculated when you file. However, since your age 70 amount is based on 48 months of delayed Retirement credits (DRCs) times the 0.6667% of your PIA, (or 32% of your PIA), it is the same thing as multiplying the COLA to your age 70 estimate. There is no compounding of the benefit by delaying. As a percent of total benefit, your last months increase is the smallest, ie every months increases is the same amount.

 

[pb4uski]

COLA increases are always applied to your PIA, (primary insurance amount) which is your amount at FRA, calculated when you file. However, since your age 70 amount is based on 48 months of delayed Retirement credits (DRCs) times the 0.6667% of your PIA, (or 32% of your PIA), it is the same thing as multiplying the COLA to your age 70 estimate. There is no compounding of the benefit by delaying. As a percent of total benefit, your last months increase is the smallest, ie every months increases is the same amount.

Correct, the 8% increases are simple interest, not compounded... so the first year's increase is 8.00% but the last year's increase is only 6.45%.

100
108	8.00%
116	7.41%
124	6.90%
132	6.45%

I recognize that the increases are actually by month but I think people relate to them better by year.