Twenty-nineteen is right around the corner, and that means big changes to Social Security. Social Security provides income to more than 43 million retired American workers. With a program this large, it can be hard to keep up with all the changes. Stay informed with this list of 5 changes to Social Security in 2019.
1. Larger monthly payment
Social Security payments will increase 2.8 percent in 2019. This is the biggest increase to the Social Security COLA (cost-of-living adjustment) since 2012. The COLA for the upcoming year is determined by calculating the cost of goods and services in 2018 and the last quarter of 2017.
The average monthly paycheck for an individual Social Security recipient will be $1,461, up $39.64 in 2019. The average payment for a married couple will be $2,448. However, you may get more or less depending on how much each of you earned while you were working.
2. Tax increase for high-income earners
Social Security is currently funded through a 12.4 percent payroll tax, with half being paid by employers and the other half by employees. This number increases based on changes in Social Security’s average wage index. The maximum earning subject to Social Security payroll taxes is climbing this year. For 2018, the maximum earnings threshold was $128,400. The number is climbing $4,500 to $132,900 in 2019.
3. Full retirement age is rising
The full retirement age (FRA) for Social Security is based on when you were born. This is the year when you can begin claiming 100 percent of your benefits without penalty or deduction. The FRA is climbing by two months every year until it eventually reaches 67.
For example, if you were both in 1955, your FRA is 66 and 2 months. If you were both in 1956, your FRA is 66 and 4 months. The FRA will continue to increase until it plateaus at 67 for those born in 1960 and later. In 2019, the FRA is 66 years and 6 months for people born in 1957.
4. Workers can earn more without penalty
If you’re younger than FRA, collecting Social Security benefits, and still working, you could be subject to a Social Security earnings test. This means Social Security will decide whether or not to cut your benefits based on how much you’re earning.
In 2019, the maximum amount you can earn without failing this test will increase 3.5 percent to $17,640. For every $2 above that amount, Social Security will withhold $1 in benefits.
If you’ve already reached your FRA, you can earn up to $46,920 without being penalized. If you exceed this limit, Social Security will withhold $1 for every $3 earned above the limit.
If your benefits are cut, don’t worry. The money will be added back to your work record so you can collect on the income once you reach FRA and stop working.
5. Medicare Part B premium increase
The 2019 premium for Medicare Part B is increasing to $135.50 from $134 in 2018. Most Americans will pay this premium directly from their Social Security paycheck. However, the increase in the COLA previously mentioned will mostly be consumed by the Part B premium increase.
The Social Security hold harmless provision prevents Part B premiums from rising faster than that Social Security COLA, but when the COLA rises, so will the Part B premium. This means some people will see more of their Social Security paycheck going toward Medicare instead of their bank account.
For more information about Social Security and Medicare, visit us at medicareworld.com.