Whether you're already collecting Social Security or are still working but anticipating those benefits down the line, there are a few key changes taking place next year that could affect you financially. Here are three you really need to be aware of.

1. A paltry cost-of-living adjustment

The purpose of cost-of-living adjustments, or COLAs, is to help seniors on Social Security retain their buying power in the face of inflation. Because seniors can collect Social Security for several decades, locking in a single monthly benefit for life, without ongoing adjustments, would mean automatically sentencing retirees to a world of financial struggle.

But COLAs aren't always the lifeline seniors expect them to be. In fact, going into 2020, beneficiaries are getting a meager 1.6% boost, which is nowhere close to the 2.8% raise they received a year prior.

Loose stack of Social Security cards


In fact, when we apply that 1.6% to the $1,479 a month the average senior collects in benefits, the result is an additional $23.67 -- not a huge monthly boost. Throw in the hike that Medicare premium hikes will wipe out about 40% of the average beneficiary's COLA, and it's clear that seniors who count on Social Security for the bulk of their income will need to tighten their purse strings.

2. A higher wage cap for tax payment purposes

Social Security gets much of its funding from payroll taxes, and workers face a 12.4% tax rate on their earnings. Salaried workers pay half that amount while their employers pick up the other half. Self-employed workers, meanwhile, pay the entire 12.4%.

But you may not necessarily pay that tax on your entire income. Social Security taxes are subject to a wage cap that changes from year to year. Currently, it's $132,900, which means earnings above that point don't count for Social Security tax purposes. In 2020, however, the wage threshold is increasing to $137,700, which means workers earning at or above that level will pay an extra $297.60 in Social Security tax if salaried, or an extra $595.20 if self-employed.

3. A higher earnings test limit

The Social Security Administration allows you to earn an income from a job and collect benefits simultaneously. But if you do so prior to reaching full retirement age (either 66, 67, or somewhere in between, depending on your year of birth), you'll be subject to the earnings test, which dictates how much money you can bring in before having benefits withheld.

For the current year, you can earn up to $17,640, or up to $46,920 if you've reached or are reaching full retirement age in 2019, without having your benefits impacted. These limits, thankfully, are rising in 2020, which means workers get a little more leeway to earn money without having benefits withheld.

In 2020, your Social Security benefits are safe if your earnings don't exceed $18,240. From there, you'll have $1 in Social Security withheld for every $2 you earn. If you'll be reaching full retirement age in 2020, you can earn up to $48,600 without having your benefits touched. From there, you'll have $1 in Social Security withheld for every $3 you earn.

You should note that the benefits you have withheld aren't forfeited permanently; they get added back into your monthly Social Security income once you reach full retirement age. However, claiming benefits before full retirement age will result in a separate, automatic reduction, so if you have the option to continue collecting a sizable paycheck, it could make sense to hold off on filing.

Social Security's rules can change from year to year. Whether you're retired or not, it always pays to stay current on what's happening so you know how your finances will be affected.