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Retirement Planning

How much does Social Security increase each year?

As you approach retirement age, Social Security often becomes an important part of any long-term retirement planning.

For many, Social Security might make up a significant portion of your overall retirement income, so it's critical to understand how cost of living and other increases can impact your earnings.

You may be asking, "How much does Social Security increase each year?" Keep reading to learn about relevant factors that can affect potential increases.

Social security earnings

There's a lot of data that goes into calculating Social Security benefits. However, there's some basic information about Social Security earnings you should know.

To qualify for Social Security benefits, you need 10 years of working experience. At that point, once you hit age 62, you are eligible to start claiming benefits. Your total benefit is based on an average of your highest 35 years of paid work. If you work less than 35 years, years without earnings are averaged in as zeros.

Cost of living increase

The Social Security Administration (SSA) considers the effect of inflation on the buying power of Americans relying on Social Security.

To that end, they implement a Cost of Living Adjustment (COLA). The COLA is affected by many factors, but it's primarily tied to the Department of Labor's Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

The Social Security Cost of Living Adjustment helps beneficiaries keep up with inflation. Each year, the SSA looks to the average of the previous year's CPI-W data and compares it to the current year. If the average has increased over the previous year, the SSA raises the next year's benefits to keep up.

A COLA isn't guaranteed each year, and the percentages can vary. For example, if the wage earners consumer price index fell, there would be no changes to payouts; it would remain the same until prices rose again.

In 2019, the COLA was 2.8 percent. The SSA announced the Social Security increase for 2020 as 1.6 percent.

Earnings limits

The SSA has an annual earnings limit. This is the income limit you can earn and still receive all of your Social Security benefits. In 2019, the annual earnings limit for people younger than full retirement age is $17,640. In 2020, it's $18,240.

If you're still working in the year of your full retirement age (this depends on your birth year), the income limit in 2019 is $46,920. In 2020, it increases to $48,600.

If you're claiming Social Security benefits and you're earning more than the limit, your monthly Social Security benefit can be reduced. Once you hit your full retirement age, you don't have to worry about earnings limits, but note that your benefits could be subject to income taxes.

Benefits in full retirement age

When it comes to Social Security, it's important to realize that the age you claim your benefits can have a big impact on your overall earnings.

Under its current structure, once you hit your full retirement age, which depends on your birth date, you can receive 100 percent of your Social Security benefits. If you're able to delay your claim, up to age 70, you're eligible for up to 132 percent of your monthly benefits.

After age 70, Social Security benefits no longer increase, even if you wait to claim them.

Boost your Social Security earnings

There are a number of strategies you can employ to help maximize your Social Security benefits as you approach and move into retirement.

The simplest way to boost your earnings is to hold off on claiming your benefits. Every month you're able to wait past your full retirement age translates into a small increase in your benefits, up to the age of 70.

You can also stay in the workforce, which could help increase the average of your highest 35 years of paid work.

Retirement planning with annuities

If you're looking for a boost to your long-term retirement income, in addition to your Social Security benefits, an annuity may be something to consider.

Annuities have the potential to provide a steady stream of income in retirement with tax-deferred growth on your investment.

Talk with your trusted financial and tax advisors to determine if annuities should be part of your retirement portfolio.


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Annuities are intended as vehicles for long-term retirement planning, which is why withdrawals reduce an annuity's remaining death benefit, contract value, cash surrender value and future earnings. Withdrawals from annuities may also be subject to income tax and, if taken prior to age 59 ½, an additional 10% IRS tax penalty may apply.

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