5 Changes to Social Security for 2019
Social Security is an important part of retirement planning, so it is essential that you stay on top of any changes that may impact your overall retirement plan.
However, this can be challenging, as the rules can change from year to year, and even claiming strategies that were once commonly used may no longer be an option for you. The rules are also complex, and different rules can apply to different people depending on when you were born, whether you are married, divorced, or widowed, your age, how much income you make, and where you have your retirement savings.
All of these factors can impact your Social Security benefits, taxation, and what claiming strategies are available to you, and it would be wise to consult with a Social Security planning specialist or a retirement planner who is well-versed in the complex rules of Social Security before you retire.
Below are 5 of the main changes to Social Security for 2019 that you should be aware of:
1.) Cost-of-Living Adjustment (COLA)
The Cost-of-Living Adjustment is an annual rate of increase on your Social Security benefits that is designed to help Social Security keep up with the cost of inflation. This changes from year to year, and is usually announced in October for the following year. The 2019 COLA is an increase of 2.8% – which is the largest increase since 2012. (The previous two years have been below 1%.)
2.) Social Security Withholding Tax
Payments to retirees on Social Security are funded through a 12.4% payroll tax on workers, which is split between employers and employees. The threshold of earnings subject to the tax increased by 3.5% this year (from $128,400 to $132,900), meaning that higher income earners will contribute more in Social Security taxes than in previous years.
3.) Full Retirement Age (FRA)
For those turning 62 in 2019, the Full Retirement Age (FRA) will be 66 and 6 months, up from 66 and 4 months for those who turned 62 in 2018. Early claiming is still available at Age 62, but benefits will be reduced by 27.5% by claiming at 62 rather than waiting until FRA. If you were born in 1960 or later, your FRA will be 67. By waiting until Age 70, you can increase your benefit by up to 76% more than what you would receive by filing early. (Consult with a Social Security specialist to determine the best filing age for your particular situation.)
4.) The Earnings Test
The Social Security earnings test defines how much your benefits will be reduced if you file for Social Security before Full Retirement Age and continue to work. In 2019, the annual limit for how much you can earn before your benefits are reduced will increase by $600 to $17,640. Anything you earn over this amount will reduce your Social Security benefit by $1 for every $2 you earn above the limit.
If you are currently receiving benefits and you are turning FRA in 2019, your benefits will be reduced by $1 for every $3 you earn over $46,920 (up $1,560 from last year), until you reach FRA. Once you reach FRA, no benefits will be withheld even if you continue working.
5.) Social Security Disability Thresholds
If you qualify for Social Security disability payments, you will receive a slight increase in 2019. Legally blind recipients will receive an increase of $70 per month, up to a maximum of $2,040 per month, while non-blind recipients will receive an increased benefit of up to $1,220 – up $40 per month from 2018.
For more information on these changes, as well as updates to Medicare, you may wish to check out this webinar recording from our February webinar.
If you would like to discuss your Social Security plan with an expert who can help you to make sure you are choosing the right claiming strategy for your particular situation, and making the right choices to maximize your benefits, please feel free to contact our office for a FREE initial strategy session!