Social Security changes

By Jim Probasco, Investopedia

Every October the Social Security Administration (SSA) announces the annual Social Security changes. Here are the changes set to take effect Jan. 1, 2019, according to the SSA’s annual fact sheet. Increased payments actually begin December 31, 2018.

1. Beneficiaries will see a 2.8% increase in payments

For 2019, more than 67 million Social Security beneficiaries will see a 2.8% cost-of-living adjustment (COLA). This increase is meant to counteract the effect of inflation. The Bureau of Labor Statistics (BLS) calculates the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), and this calculation ensures that your Social Security check has the same buying power that it did the previous year. If the CPI-W increases more than 0.1% year over year between the third quarter of the previous year and the third quarter of the current year, Social Security will raise your check by the same amount.

The 2.8% bump in 2019 represents a 0.8% increase over last year’s 2% COLA and the largest increase since 2012 when benefits went up 3.6%. For the average Social Security recipient, however, this 2.8% raise will amount to just $39 per month, as the average monthly payout increases from $1,422 in 2018 to $1,461 in 2019.

2. Maximum taxable earnings will increase to $132,900

In 2018, employees were required to pay a 6.2% Social Security tax (with their employer matching that payment) on income up to $128,400. Any earnings above that amount were not subject to the tax. In 2019, the tax rate will remain the same at 6.2%, but the tax cap will increase to $132,900.

The flip side of this is that as the taxable maximum increases, so does the maximum amount of earnings used by the SSA to calculate retirement benefits. In 2018, the maximum monthly Social Security benefit for a worker retiring at full retirement age was $2,788. In 2019, the maximum benefit will increase $73 per month to $2,861.

3. Full retirement age will continue to increase

The absolute earliest you can start claiming Social Security retirement benefits is 62. However, claiming before your full (or normal) retirement age will result in the payout being permanently reduced. For those who turn 62 in 2018, full retirement age is 66 and four months. But for those who turn 62 in 2019, the full retirement age will increase to 66 and six months. Full retirement age is set to increase by two months each year until it hits 67. So, for anyone born in 1960 or later, full retirement age will be 67. (You can see your full retirement age here.)

If you delay collecting Social Security past your full retirement age you can collect more than your full payout. In fact, if you put off claiming until age 70 you will receive a 76% higher annual payout than if you started receiving benefits at 62.

4. Earnings limits will increase

If you work while collecting Social Security benefits you may find all or part of your benefits temporarily withheld, depending on how much you earn. However, those income limits will increase slightly in 2019.

Prior to reaching full retirement age,you will be able to earn up to $17,640 in 2019. After that, $1 will be deducted from your payment for every $2 that exceeds the limit. The 2019 annual limit marks a $600 increase over 2018’s limit of $17,040. If you reach full retirement age in 2019, you will be able to earn $46,920, up $1,560 from 2018’s $45,360 annual limit. For every $3 earned over the 2019 limit, your Social Security benefits will be reduced by $1, but it will only apply to money earned in the months prior to hitting full retirement age. Once you hit full retirement age, no benefits will be withheld if you continue working.

5. Social Security disability thresholds will increase

About 10 million Americans qualify for Social Security disability payments, and those thresholds are also increasing slightly in 2019. The legally blind will receive a maximum of $2,040 a month, an increase of $70 a month over 2018. For the non-blind, the maximum benefitwill increase $40 a month to $1,220.

6. You can view your COLA notice online

For the first time this year, most Social Security recipients will be able to view their COLA notice online through their mySocialSecurity account in December. In the past, that notice was mailed. Notices will still be mailed this year, but in the future, recipients will be able to choose whether to receive their notice online or by mail. As always it’s a good idea to be aware of additional changes that could be announced in the coming months.


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