2020 Social Security Changes (in brief)

Here’s a summary of the key changes that we believe will have the highest impact regarding Social Security in 2020 and the questions they may create for retirees and those who are close to retirement. We’ve outlined these changes in brief and in no way can any of this be interpreted as financial advice specific to any one individual.

Cost of living adjustment not quite keeping pace

The COLA, or cost of living adjustment, for 2020 was set at 1.6%. In other words, social security benefits were adjusted upwards by 1.6% to account for the rise in daily expenses of life that occur naturally due to inflation. This is slightly lower than the increase for 2019.

While this increase seems in line with what it has been in years prior, we find it slightly troubling that the 2020 COLA seems to fall a tiny bit short of inflation. According to the Bureau of Labor Statistics, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) was 2.5% for the 12 months preceding January 2020.

With such a disconnect between the COLA and the rate of inflation, we’re not quite sure social security is keeping pace with the rise in living expenses. This could present significant challenges for retirees and to us this only underscores the importance of having multiple source of income during retirement.

Harder to earn SS credits

The 2020 social security update established that this year, an individual must earn $1,410 to earn one Social Security credit. This is an increase from last year. To quality for Social Security, a person must have earned 40 credits in total, and you can’t earn more than 4 credits in one year. There are special conditions that apply to this pertaining to domestic and farm work as well as a church-controlled organization, to name a few, so it would be a good idea to review these provisions.

Maximum taxable earnings rose

Those who are still working will be not so happy to learn that the maximum taxable earnings have risen slightly. In 2019 you were taxed 6.2% on earnings up to $132,900. Starting in 2020, this amount is $137,700. In other words, the threshold where your earnings stop being taxed for social security is now roughly $5k more than last year.

Your earnings will be taxed during the time interval prior to reaching full retirement age. This begs the interesting question of when you should start claiming Social Security, a complicated question to answer as it varies depending upon several factors such as your spending and life expectancy.


As you can see there’s plenty of technical detail over a broad range of topics. We kept it brief as not to overwhelm, but there’s certainly more to talk about and way more detail that goes into this topic. This can be quite a bit for the average person to process. In no way should these general concepts be construed as any type of financial advice. If you have questions, please feel free to set up a time to go over these changes and how they may impact your personal situation by visiting our contact page.


Bureau of Labor Statistics. Consumer Price Index Summary. Consumer Price Index – January 2020. Retrieved from https://www.bls.gov/news.release/cpi.nr0.htm

Social Security Administration. Social Security Fact Sheet: 2020 Social Security Changes. Retrieved from https://www.ssa.gov/news/press/factsheets/colafacts2020.pdf

Social Security Administration. When to start receiving social security benefits. Retrieved from https://www.ssa.gov/pubs/EN-05-10147.pdf

About James Dwyer, CFP®, AIF®

James Dwyer has worked in the financial services industry for over 15 years. He is currently a partner at Providus Advisors, an investment advisory firm located in Chandler, AZ.

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