More than 67 million Americans will have another reason to celebrate heading into the holiday season. The Social Security Administration has announced that beneficiaries of the program will enjoy a raise of 1.6% starting in 2020.
Estimated Average Monthly Social Security Benefits Payable in January 2020:
What this means for beneficiaries
While the numbers may not seem large upon first glance, it may add up to hundreds or even thousands of dollars for some retirees. It’s worth noting that the taxation of Social Security benefits is dependent upon income. Those in the lower income tax brackets would be wise to calculate the impact of the increase, as it may push them above the threshold for paying additional Social Security taxes.
High income earners would also be wise to pay attention to the effect of the increase on total taxable income. Our tax system is made up of complicated thresholds for claiming deductions or being subject to additional taxation. A few hundred dollars can make a major difference, so we encourage you to consult with your tax professional and your Certified Financial Planner™ Practitioner.
If you’re in the enviable camp of not requiring additional income, consider these ideas:
- Reduce the pressure of distributions on other assets, like your IRA. Allow your invested money to continue working for you by reducing your distributions and offsetting the difference with the increase from Social Security benefits.
- Contribute the extra cash flow to a college fund for a grandchild.
- Donate the additional income to your favorite charity.
Questions about how Social Security works or how the change may impact you? You can reach us at wisdom@wisdomws.com.
Andrea L. Blackwelder, CFP®, ChFC, CDFA® and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with the Denver Financial Advisors at Wisdom Wealth Strategies.