Social Security recipients will get 2.8% bigger checks in 2019. The program will also be adjusted in several other important ways next year that could affect the payments you receive or how much you pay into the system.
Check out the important five changes coming your way next year…
1. Larger Social Security Payments
Social Security payments will increase by 2.8% in 2019 for more than 67 MILLION SS beneficiaries (and that’s the biggest increase to Social Security income since 2012). This cost-of-living adjustment (COLA) was determined by computing the change in prices for goods and services in the third quarter of 2018 from the third quarter of 2017, using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This year, it averaged 246.352 in the third quarter, and in 2017 it averaged 239.668 in the third quarter, which works out to a 2.8% increase.
(For the first time this year, most Social Security recipients will be able to view their COLA notice online through their my SocialSecurity account in December. In the past, that notice was mailed.)
2. Full Retirement Age 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.
People who will turn 62 in 2019 will need to wait until an older retirement age than existing Social Security beneficiaries in order to claim their full retirement benefit. The full retirement age for those born in 1957 is 66 and six months, up from 66 and four months for people born in 1956, 66 and two months for those with a birth year of 1955 and 66 for everyone born between 1943 and 1954. The full retirement age will further increase in 2-month increments over the next two years until it reaches age 67 for everyone born in 1960 or later.
3. A Higher Social Security Tax Cap
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.
Those who earn more than $132,900 in 2019 will notice a bump in their paychecks once their earnings have surpassed the taxable maximum and they no longer have Social Security tax withheld from their salary.
4. Larger Earning Limits
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.
Once you turn your full retirement age there is no penalty for working and collecting Social Security benefits at the same time and your benefit is recalculated to give you credit for your continued earnings and any benefits that were withheld in the past.
5. Increased Medicare Part B Premiums
Most people are subject to the standard rate of $135.50 in 2019 (up from $134 in 2018). But if your modified adjusted gross income according to your tax return exceeds a certain amount, you will pay more.
What you pay for Medicare premiums in 2019 is determined by your 2017 tax return.
If your income from that year is above $85,000, you will pay more for your Medicare Part B premiums based on what is called an Income Related Monthly Adjustment Amount.
However, About 2 million Medicare beneficiaries will actually pay less than the $135.50 next year due to the “hold harmless” provision that protects certain Social Security beneficiaries from paying more for their Part B premiums.
Social Security is arguably the most important social program in this country, especially for those in, or close to retirement age. And now you’re in the know for these five big changes coming to Social Security in 2019.
If you’d like to find out more on any changes that could affect you, contact a retirement financial advisor at CKS Summit Group. We’re here to help you achieve the best retirement income portfolio for you. Click here to set up your complimentary strategy session today.