Social Security and Medicare: Changes Coming for 2020
So, any increases in benefits or payments are important. Last week, both Social Security and Medicare had major announcements about benefits for 2020.
Social Security Benefit to Rise Very Modestly for 2020
Every year Social Security announces a Cost of Living Adjustment (COLA) for Social Security benefits. Over the last 40 years, benefit increases have been as high as 14.3% and as low as ZERO.
In 2019 benefits increased by 2.8%.
The boost is more modest for 2020. Benefits will rise by only 1.6%.
The Social Security Full Retirement Age Increases, Again
For only the 10th time ever, the full Social Security retirement age (the age at which you can collect 100% of your monthly benefit) will increase. In 2020, the full retirement age will be 66 years and eight months.
The full retirement age will increase again in 2021 by another two months and again in 2022 to 67 years.
The Social Security Raise is Probably Not Enough
Social Security benefit increases are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. This index only takes into account 3 months of inflation data, not a whole year. Therefore, it sometimes does not do a good job of reflecting true inflation — leaving beneficiaries behind.
If Social Security does not keep pace with the actual rise in prices, then beneficiaries can afford less.
A report from the Senior Citizens League found that the purchasing price of Social Security benefits has declined by a whopping 34% over the last 18 years. In other words, if a big trip to the grocery store in 2000 cost you $100, today you would only be able to afford about 2/3 of those goods.
The Wealthy Can Get a Higher Maximum Social Security Benefit
In 2020, well-to-do retirees can net quite a bit more each month. According to the Social Security Administration, the maximum monthly benefit at full retirement age will increase by $150 a month to $3,011.
That’s an extra $1,800 a year for lifetime upper-income earners during retirement.
Medicare Costs to Rise
The costs and benefits of Medicare are also adjusted every year.
This year, the Centers for Medicare and Medicaid announced increases for 2020:
- The standard monthly premium for Medicare Part B will be $144.30 in 2020, up from $135.50 in 2019.
- The annual deductible for Medicare Part B (covering some costs related to physicians, outpatient hospitals, home health, medical equipment and other services not covered by Part A) will be $197 — a $7 increase.
- The Medicare Part A inpatient deductible will be higher — the exact amount depends on the number of quarters of work history you have.
- The maximum allowable deductible for standard Part D plans will increase to $435 in 2020. And the out-of-pocket threshold will increase significantly to $6,350.
More Limited Medicare Coverage Options
Medigap plans C and F will not be available to new enrollees.
According to congress.gov, starting in 2020, Medicare Supplement plans that pay the Medicare Part B deductible will no longer be sold to those newly eligible. This change is part of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).
Is it Time to Update Your Retirement Plan?
It is important to keep your retirement plans up to date.
You may want to update your:
- Social Security benefit amount
- Optimistic and Pessimistic inflation rates
- Medical inflation rates
- Anything else in your plan that may have recently changed
The NewRetirement Planner makes it easy to create and maintain a detailed and reliable plan.