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It’s Official -- These 5 Social Security Changes Are Coming for 2019

Matthew Frankel, CFP, The Motley Fool

We recently learned that Social Security beneficiaries are getting a 2.8% cost-of-living adjustment, or COLA, for 2019. However, that's just one of several Social Security changes that were just announced that are tied to rising prices.

For workers, Social Security's maximum taxable earnings are increasing, and more income will be required to earn a Social Security "credit." Beneficiaries who claimed Social Security early and still work will be happy to learn they'll be able to earn more without a benefit reduction in 2019, and for high earners, the maximum possible Social Security benefit is also on the rise.

With all of that in mind, here are the recently released details of these five 2019 Social Security changes.

Beneficiaries are getting a raise

As I mentioned, Social Security beneficiaries are getting a 2.8% COLA starting with their January 2019 benefit payment. The Social Security Administration, or SSA, estimates that the average benefit paid to all retired workers will increase from $1,422 to $1,461 as a result.

It's worth noting that Medicare hasn't yet released its Part B premium changes for 2019 as of this writing, and this will be an important factor in determining the effective COLA. In other words, if your Social Security benefit rises by $50 per month but your Medicare premiums increase by $40, your effective increase is just $10.

Social Security's maximum taxable earnings are rising

Each year, Social Security tax is assessed at a rate of 6.2% for employers and employees, but only on earnings up to a certain threshold. This is known as the Social Security maximum taxable earnings.

For 2019, the maximum taxable earnings will increase by $4,500 -- from $128,400 to $132,900. In other words, if you earn $150,000 in Social Security-covered employment in 2019, $132,900 of those earnings will be subject to Social Security tax, while the other $17,100 will not be.

This increases the maximum Social Security tax an employee could pay from $7,960.80 in 2018 to $8,239.80 in 2019.

One Social Security credit will require more earnings

In order to qualify for Social Security benefits, you'll need to earn 40 Social Security "quarters of coverage," which are also known as Social Security credits.

For 2019, one credit translates to $1,360 in earnings, an increase of $40 from 2018. This may not sound like a lot of money (and it isn't, for most workers), but it's important to note that you can only earn four credits per year.

The earnings test limits are increasing

If you receive Social Security (or plan to) and you haven't reached full retirement age yet, you can now earn more money from a job without affecting your Social Security benefits. For 2019, the Social Security earnings test limits are increasing as follows:

Category

2018 Earnings Test Limit

2019 Earnings Test Limit

You'll reach full retirement age after 2019

$17,040/yr. ($1,420 per month)

$17,640/yr. ($1,470 per month)

You'll reach full retirement age during 2019

$45,360/yr. ($3,780 per month)

$46,920/yr. ($3,910 per month)

Data source: SSA.

If you'll reach full retirement age after 2019, $1 of your benefits will be withheld for every $2 in excess earnings. If you'll attain full retirement age during 2019, $1 of your benefits will be withheld for every $3 in excess earnings, and only earnings in the months before your birth month will be considered. As always, if you've already reached full retirement age, the earnings test doesn't apply to you at all.

The maximum Social Security benefit will be $73 higher

Finally, because Social Security benefits are limited by the maximum taxable earnings from each year (which rises over time), the maximum possible Social Security benefit is increasing for 2019, as well.

For 2019, the most someone claiming Social Security at full retirement age can get is $2,861 per month. Of course, this could become even higher if workers entitled to the maximum decide to wait longer to claim. If they claim in 2019, a beneficiary's full retirement age is still 66 years old (born in 1953), so if they were to wait until they turn 70 in 2023, their benefit would start at $3,776.52 plus any additional COLAs that are given between now and then.


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