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.

________________

About LRPC’s Monday Morning Minute

Lawton Retirement Plan Consultants, LLC (LRPC) Monday Morning Minute is crafted to provide decision-makers with important information about the economy, investments and corporate retirement plans in a format that allows a reader to consume the information in less than 60 seconds. As an independent, objective investment adviser, LRPC has access to many sources of research and shares the best and most relevant information with its readers each week.

About Lawton Retirement Plan Consultants, LLC 

Lawton Retirement Plan Consultants, LLC (LRPC) is a Milwaukee, Wisconsin-based independent, objective Registered Investment Adviser (RIA) providing investment advisory, fiduciary compliance, employee education, provider management and plan design services to employer retirement plan sponsors. The firm specializes in Socially Responsible Investment (SRI) strategies for retirement plans and is a pioneer in the field. LRPC currently has contracts in place to provide consulting services on nearly a half billion dollars in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or bob@lawtonrpc.com or visit the firm’s website at https://www.lawtonrpc.com. Lawton Retirement PlanConsultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, a plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges, and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.