The money seniors have paid into social security (SS) during a lifetime of working is significant and this monthly payment is often a cornerstone of income for retirees. For those considering a reverse mortgage or those that already have one, keeping up on these changes is crucial. There is a continuing debate in Washington as to how the program must evolve to return the investments of those already retired, as well as future retirees that will depend on this program. Here are the changes already set or being discussed for 2020.
Cutting Payroll Tax
With many Americans worried about a downturn coming, President Trump is considering cutting the payroll tax to spur spending and economic growth. This change would put more money in American pockets which tends to create a multiplier effect with the use of credit cards, infusing money into our markets quickly. President Obama did this in 2011 and 2012 to grow the economy. The negative effect is that less money would be put into the Social Security reserves for current retirees and future retirees.
Increase in benefits for High-Income Earners
Those close to the maximum benefit for social security are expected to get a slight increase in 2020. Financial Planner and Forbes Contributor David Rae states that the maximum check at Full Retirement Age is currently $2,861 per month. Of course each month a person delays taking their retirement benefits will increase their check, but all must begin taking benefits by age 70.
Cost of Living Adjustment (COLA) for 2020 expected
Retirees currently receiving SS income will see an increase in their checks to match with inflation this coming year. “For 2020, the SS cost of living adjustment is expected to be around 1.8 percent,” explains Mr. Rae. “Not life-changing, but if you are living off of SS alone, every penny counts. For the average retiree, this would likely amount to around $25 more per month. For the highest earners, this could come closer to $50 more per month in Social Security retirement benefits.”
This COLA is smaller than the increase in 2019. Financial planners and retirees should continue to look at alternative strategies to help their clients live better in retirement. A clear sign that retirees need a little more help is their credit card balances; if a senior is not paying off their credit cards each month, they are digging a hole and paying a high price for that money. A reverse mortgage is a great solution to those needing some additional funds in retirement at a significantly lower interest rate than a credit card. While not a solution for all, it should be an alternative at least reviewed by all.
Increasing the Full Retirement Age (FRA)
For those born in 1960 or later, the FRA has been gradually increased over 33 years to the age of 67 years old. Politicians have long been considering increasing the FRA. According to ssa.gov, Since the program first began paying monthly Social Security benefits in 1940, the average life expectancy for men reaching age 65 has increased nearly 7 years to age 84.3, for women reaching age 65, their average life expectancy has increased nearly 7 years to age 86.6. People are living longer today and the trend for Americans has been that seniors are working longer before retirement.
For more information about setting up a reverse mortgage to provide another income stream in retirement, contact: Robert Snow Krepps, NMLS # 255191, at HighTechLending Inc, at firstname.lastname@example.org or 877-567-7476.
HighTechLending Inc, NMLS # 7147, is an Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act.