This article was updated February 27, 2020.
Good news for Social Security beneficiaries! The Social Security increase for 2020 will be 1.6 percent, according to the Social Security Administration’s announcement in October 2019. The increase will affect nearly 69 million Americans who will receive benefits in 2020.
How much will the increase be?
Determined by the cost of living adjustment, or COLA, the Social Security increase for 2020 averages out to about $24 per recipient, or about $288 per year. The average Social Security check increased from $1,479 in December 2019 to $1,503 in January 2020.
This increase is about half the increase that was seen going into 2019 (2.8 percent), but is still higher than the average COLA increases from the past decade (1.4 percent).
How much will be taken out for Medicare?
On November 8, 2019, the Centers for Medicare and Medicaid Services (CMS) released the Medicare costs for 2020. The national average for the Part B premium is $144.60 in 2020, an increase from $135.50 in 2019.
Because the Medicare Part B premium is automatically deducted from Social Security checks for people who receive both benefits, this increase nearly halves their COLA increase, leaving them with a modest net gain of $14.90.
Is Social Security going broke?
No; Social Security is a self-sustaining system funded through workers’ payroll taxes.
However, benefits could be slashed by as much as 23 percent across the board if Congress does not pass a progressive bill to increase Social Security taxes, or find another solution to the problem. The Social Security trust is expected to become insolvent if Congress does not find a solution by 2034.
Is the increase enough for struggling seniors?
American seniors are one of the most impoverished demographics in the United States. An increase of $24 leaves many seniors with an annual income of $18,036 to live on for the year, and a large amount of that is automatically devoted to healthcare bills. To put it simply, it’s not enough. Here are four possible solutions floating through Washington.
- Pass the Social Security 2100 Act. This bill would tax the wealthy at a rate proportional to rates low- and middle-class Americans pay, increase payroll taxes by 1.2 percent over 24 years, increase benefits by 2 percent across the board, and use a new method to calculate COLAs more accurately.
- Tax high incomes. In 2020, no income over $137,700 has Social Security taxes withheld from it. Increasing the amount of Social Security taxes paid by the wealthy could add billions to the trust fund without increasing payroll taxes or cutting benefits.
- Naturalize undocumented immigrants. Another possibility is to naturalize undocumented immigrants who are already living and working in the United States but receiving nontaxable pay under the table. Naturalizing the 10-12 million undocumented immigrants who currently live and work in the United States would immediately make their wages taxable.
- Increase the minimum wage. A dollar you paid into Social Security in 1983 is no longer there. The system is constantly cycling money in and out; the current workforce pays taxes into the trust fund to fund Social Security for today’s retirees. Increasing the minimum wage and boosting workers’ taxable wages would immediately increase the Social Security trust fund.
Continuous legislation put forth by the Trump administration threatens to decrease benefits across the board for current and future beneficiaries.