A new year always brings change, and this year is no exception. From Market Watch, the article “Numbers that older workers and retirees need to know in 2020” provides key information for this new year.
Retirement Plan Changes. Limits for how much can be saved in 401(k), 403(b), Thrift Savings Plan, and most 457 plans have increased by $500 to $19,500 for 2020. If you are 50 and older, the “catch-up” contribution has also increased by $500, so you can now save an additional $6,500 in those accounts.
For those with SIMPLE retirement plans, which are usually from small businesses with 100 or fewer employees, you can increase savings by $500 to $13,500.
What hasn’t changed—if you have an individual traditional IRA, you can save $6,000, with a catch-up contribution of $1,000.
Social Security Changes. The Social Security Administration reports that the average monthly benefit in 2019 was $1,356.05. This will rise by 1.6% in 2020, which will mean an increase of $21.69 per month. Last year, some 63.8 million Americans took Social Security benefits. It was the first year since the program began in 1935 that spending topped $1 trillion.
Another change to Social Security in 2020 is the longer period of time to reach full retirement age. For people born in 1958, this now increases to 66 years and eight months. If you were born in 1958, you’ll need to be that age to collect your full retirement benefit. The longer period is also going to increase in 2021 and 2022—making the full retirement age 67 for anyone born in 1960 or later.
That doesn’t mean people can’t get Social Security benefits earlier—you can elect to take benefits as early as age 62—but you’ll receive less. If you take benefits at age 62, they’ll be 75% of the monthly benefits because you will have added 48 months. At age 65, you’ll receive 93.3% of full benefits because of adding an additional 12 months. If you are taking spousal benefits, there are more numbers to consider.
Medicare Changes. The good news was the increase from Social Security. The bad news? Standard monthly Part B premiums will increase 6.7%, from $135.50 in 2019 to $144.60. That’s the minimum premium. Depending upon your premium, they could go as high as $491.60 per month. Medicare officials blame higher drug prices on the increase.
Health care costs are part of a rising tide of costs facing retirees and older workers. Considering how few Americans have enough money saved for retirement, this is going to become more of a national issue as boomers and millennials age. It should serve as a reminder for all—save as much as you can for retirement, starting now.
Reference: Market Watch (Dec. 28, 2019) “Numbers that older workers and retirees need to know in 2020”