Social Security beneficiaries are finally getting some good news. It was recently announced that there will be a 2.8% cost-of-living adjustment (COLA) for beneficiaries in 2019. However, that is only a small portion of the changes being made to Social Security next year.
1. The Social Security Cost-of-Living Increase
Yes – Social Security beneficiaries will see a 2.8% increase starting January 2019. This increase has been made to adjust for cost-of-living. The Social Security Administration estimates this will increase the average beneficiary’s monthly earnings by about $40. The average monthly benefit paid in 2018 was $1,422, the SSA estimates the average payout will be $1,461 monthly in 2019.
2. Taxable Earnings
The next big change for Social Security next year will be the maximum taxable earnings. The maximum taxable income will increase from $128,400 to $132,900. Social Security tax sits at 6.2% for employees and employers. So, if you earn $150,000 in Social Security-covered employment, you’ll have to pay SS tax on $132,900 of it. This change also increases the maximum Social Security tax an employee could pay from $7,960.80 to $8,239.80.
3. Maximum Social Security Benefits Will Be Higher
Another huge change in Social Security for 2019 will be the maximum possible benefit. Someone claiming Social Security at full retirement age (66) can claim as much as $2,861 per month. This will increase even more if the retiree waits longer to claim. If they begin claiming four years from now, at the age of 70, their benefit would start at $3,776.52. Not to mention, they’ll be able to benefit from any cost-of-living adjustments made between now and 2023.
4. Earning Test Limits Will Increase in 2019
Social Security beneficiaries will also be able to earn more money from a job without affecting your benefits in 2019. The changes for earnings limits in 2019 are detailed in the chart below.
|Age||2018 Earnings Test Limit||2019 Earnings Test Limit|
|You’ll Turn 66 After 2019||$17,040/yr. ($1,420/month)||$17,640/yr. ($1,470/month)|
|You’ll Turn 66 in 2019||$45,360/yr. ($3,780/month)||$46,920/yr. ($3,910/month)|
Individuals who have reached the full retirement age will not be impacted by the earnings test. Those who will turn 66 in 2019 will have $1 of their benefits withheld for every $3 in excess earnings from employment. Only earning made in the months before your 66th birthday will be considered. Individuals who have not yet reached retirement age but are claiming benefits will have $1 withheld for every $2 in excess earnings.
5. Social Security Credits Will ‘Cost’ More
To be able to claim Social Security benefits, you need to earn 40 Social Security credits. You can only earn four credits per year. Each credit will equate $1,360 in earnings in 2019 (a $40 increase).
Social Security Benefits By Age
The formula used to determine how much you’ll receive in Social Security benefits depends on the year you turn 62 years old. For instance, if you turned 62 in 2012, that year’s formula would be used to determine your benefit. Of course, you’ll also be entitled to any other cost-of-living adjustments made as well. People turning 62 in 2018 can expect the benefits detailed in the chart below (via The Motley Fool).
|Annual Income||Age 62||Age 65||Age 66||Age 68||Age 70|
Don’t forget, eligible Americans can begin claiming Social Security benefits between the ages of 62 and 70. Those choosing to start receiving benefits before the retirement age of 66 will have their benefits permanently reduced. On the other hand, individuals who waiting to start claiming SS benefits will have theirs permanently increased.
So, there is some good news for Social Security beneficiaries in 2019. However, it is important to keep in mind that, while there are many positive changes being made to Social Security this year, Medicare has not yet released an announcement about changes Part B for 2019. So, these increases in Social Security may be overshadowed by Medicare premium increases. Only time will tell.
Readers, what do you think about the Social Security changes for 2019?