Social Security Cost of Living Adjustment
The Social Security Administration (SSA) has announced the cost-of-living adjustment (COLA) for 2020 will be 1.6%, more than a percent lower than this year’s 2.8% adjustment. The adjustment is based on the increase in the Consumer Price Index for Urban Wage Earners (CPI-W) from the third quarter of 2018 through the third quarter of 2019. The increase will become effective in January 2020.
Maximum Taxable Earnings
The SSA also announced that the maximum taxable earnings that are subject to Social Security payroll taxes will increase to $137,700, up from $132,900 in 2019. Employees and employers will each continue to pay 6.2% in payroll taxes on earnings up to the limit, and all wages will be subject to the Medicare payroll tax of 1.45%. Individuals with earned income greater than $200,000 ($250,000 for married couples filing jointly) will continue to pay an additional 0.9% in Medicare taxes on all wages.
Medicare Premiums
Medicare Part B premiums have not yet been announced, but the latest Medicare Trustee’s report projects an increase of $8.80 from the current $135.50 premium to $144.30 per month. Those with higher incomes will continue to pay a surcharge known as the Income-Related Monthly Adjustment Amount (IRMAA) on both Part B and Part D. The announcement of Medicare premiums and the IRMAA income-tier surcharges is expected in late October or early November.
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