2020 Important Retirement NumbersSubmitted by Miller Financial Group | Red Oak Iowa Financial Advisor on January 6th, 2020
2020 Important Retirement Numbers
By: Daniel S. Miller, CFPTM
As 2019 has come to an end, it is important to note that each new year brings a fresh beginning. This is as true now as it ever was. In 2020, you can expect increases in savings pretax limits and contribution amounts for workers looking toward retirement. If you've already reached retirement age, you should see a moderate increase in your Social Security benefits payments. However, there will also be increased premiums in Medicare Part B that will work to partially offset some of that increase. Let's take a closer look at more 2020 retirement numbers to see how they may potentially impact us financially.
In 2020, you can now save up to $19,500 in 401(k) plans and as much as $6,000 in a personal IRA account. If you're age 50 or over, you may also be able to make catch-up contributions of an additional $6,500 in 401(k) plans and $1,000 in IRAs. Taking advantage of pre-tax savings up to the maximum limits allowed is one way to help increase your retirement savings. This may be of special importance for those late-to-the- retirement-savings-game that need to make catch-up contributions.
2020 Social Security Benefits
If you are a 2020 Social Security benefit recipient, you'll be pleasantly surprised by an increase to the gross amount of each of your checks / deposits for next year. While the increase will be modest, any increase is better than none at all. Unfortunately, the increase you'll receive in 2020 is less than it was in 2019. This year you can expect a 1.6% increase compared to the 2.8% hike that retirees received in 2019. The good news is that this year's boost is still in line with the cost-of-living adjustments over the past ten years, which have averaged 1.4%. These 2020 changes are inflation-based as per federal regulation.
Premiums for Medicare
If you are a Medicare recipient, you will need to prepare for increased costs in the coming year. For example, Part B premiums for the Standard Monthly plan will increase to $144.60. This is an increase up from the $135.50 monthly premium in 2019, an increase of 6.7% Please note this is based on the lowest, or standard income rate. The premium you will be required to pay depends on your individual level of income. There is a rule, referred to as the Hold Harmless Provision, that doesn't allow people to experience a reduction in Social Security benefits due to a hike in Medicare premiums. But a good number of retirees will pay additional premiums amounts that are based on income adjustments. Social Security Full Retirement Age (FRA) Increase For individuals born in 1958, 2020 will bring an increase in the Full Retirement Age (FRA) by two months. This will require an individual to reach the age of 66 years and 8 months of age before reaching their FRA. Once you reach this age, you then qualify for 100% of your Social Security retired worker monthly benefit assuming that you had not started ANY benefits prior to your FRA. If you decide to take your Social Security payout at any point between age 62 and the new qualifying age, you'll be subject to a permanent reduction in your monthly benefit amount. In addition, expect the qualifying retirement age to increase by another two months in 2021, and yet again in 2022. For now, FRA will peak at age 67 for people born in 1960 or later. With some of the funding issues facing Social Security, and the fact that we are living longer, healthier, productive lives, it is also very likely that the current maximum FRA may be adjusted upward in the future. Sorry, millennials, you may be working for quite a while!
Don’t forget that 2019 opportunities still exist!
Qualifying contributions may be made on IRAs and SEP IRAs as late as the tax filing deadline plus extensions in some cases. Please contact your tax advisor and our office for more information on how we may be able to assist you.
The SECURE Act To close today's post I want to make a quick mention of the recent legislation that passed known as the Setting Every Community Up for Retirement Enhancement, or SECURE Act. This legislation represents some of the biggest changes we have seen to the retirement planning landscape in years. Next month I will take a deep dive into this new legislation.
*Material presented is not intended as tax advice. For specific tax advice, please contact your own qualified tax professional.
Daniel S. Miller, CFP® is President of Miller Financial Group, Inc. with offices located in Bellevue, NE and Red Oak, IA. Dan and his team serve clients throughout the country as they prepare for the next stages of their financial lives. Dan is a published author of the book “Retirement Built to Last: Planning for When the Paychecks Stop” and has had articles published in the Wall Street Journal, Financial Advisors IQ, Successful farming and The Hill. He is also a dedicated husband, father, and advocate for the financial planning process and financial education.
Dan Miller, David Eads, Kaleb Robuck, and Marcus Taylor are investment adviser representatives of, and securities and advisory services are offered through, USA Financial Securities Corp. Member FINRA/SIPIC. A Registered Investment Advisor located at 6020 E Fulton St., Ada, MI 49301. Miller Financial Group is not affiliated with USA Financial Services.