How Much Do You Know About Social Security?
Social security is a program that is extremely important to a person who is heading into retirement. More than 60% of retired individuals depend upon their social security to account for 50% of their income. Currently there are approximately 64 million beneficiaries.
A few things to know… An attractive feature of Social Security is that it varies from year to year based on inflation, also known as the cost of living adjustment. This inflation protection can help you keep up with those rising living expenses during your retirement. In 2020, those who are on social security will get a cost of living increase of 1.6%, which is approximately $24.00 per check for the average retired worker. However, there will also be an approximate 7% increase in Medicare Part B premiums this year. According to the Centers for Medicare and Medicaid Services (www.CMS.gov), the standard Medicare Part B premium for 2020 is $144.60 versus $135.50 in 2019. The annual deductible is $198.00 versus $185.00 in 2019.
Where does this money come from? Social Security has a payroll tax of 12.4% on earned income. Earned income is wages and salaries. If a person is employed, this amount is paid half by the employer and half by the employee. The person who is self-employed is responsible to pay the entire 12.4%. There is no social security tax on any investment income.
The cap on the income that is taxed has been increased from $132,900.00 to $137,700.00. Once a worker has reached this threshold no further tax is required. This applies to approximately 6% of the American work force as the other 94% never reach this limit. Social Security is paid based upon how much you contributed into the system over a person’s working years.
The goal in retirement for the majority of Americans is supplementing other savings or investments with your social security money in order to live a more comfortable life. Retirement age varies depending on date of birth….for example, if born in 1958, full retirement age would be 66 years and 8 months.
To find out when you may reach full retirement age, visit www.ssa.gov. Once you do reach retirement age, you can also choose to wait to take your benefit. By doing so, you can increase your benefit amount each year up to 8%…until reaching the age of 70 (when you must begin taking your benefit).
It’s important to plan for retirement and there are many wonderful programs and guides to help along the way.