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It’s official: Your Social Security checks will get a modest increase next year.
The Social Security Administration announced on Thursday that the cost-of-living adjustment for 2020 will be 1.6%.
That number is less than what retirees have received in recent years. In 2019, they got a 2.8% bump, while in 2018 the increase was 2%.
Still, it’s better than zero, which retirees saw in 2010, 2011 and 2016.
Social Security cost-of-living adjustments have averaged 1.4% in the past decade.
To calculate the change, the Social Security Administration uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, CPI-W, from the Bureau of Labor Statistics.
The 2020 increase is in line with an estimate released last month by the Senior Citizens League, a nonpartisan senior group.
The next announcement for retirees to watch for is Medicare Part B premiums for next year.
Estimates from Medicare trustees peg that at $144.30, up from $135.50 in 2019.
If those estimates are correct, individuals who receive the lowest Social Security benefit amounts — $550 or less – might not see bigger Social Security checks, according to the Senior Citizens League.
Medicare Part B premiums (which cover doctor’s visits among other things) are typically automatically deducted from Social Security benefit checks.
One rule, called the hold harmless provision, prevents Part B premium increases from being larger than any Social Security benefit increases. About 70% of beneficiaries are covered, according to the Senior Citizens League.
High wage earners who do not fall under the hold harmless provision could see a small excess Medicare premium, said Joe Elsasser, president and founder of Covisum, a provider of Social Security claiming software.
While Social Security checks get a 1.6% boost, the tax rates on retirees’ income will stay the same.
If you earn at least $25,000 individually or $32,000 as a couple filing jointly, your Social Security benefits could be subject to taxes.
One way to plan for that is to increase your voluntary withholding with the Social Security Administration.
But a more effective way might be to increase withholdings from other sources of income, Elsasser said.
“If they only have Social Security, that’s going to be tax free,” Elsasser said. “It’s the other income that creates the tax on Social Security benefits.”