If there is one thing constant about Social Security, it is change. At a time when Seniors need all the help they can get, we put together this list of what you need to know for 2019.
Positive Changes to Social Security:
1) 2019 will have the largest Cost-of-Living Adjustment increase since 2012
Legislation enacted in 1973 provides for Cost-of-Living Adjustments (COLAs) to Social Security and Supplemental Security Income (SSI) benefits in order to keep pace with inflation. Due to a strengthening economic environment and healthy inflation, recipients will enjoy a 2.8% increase in monthly benefits. This is the largest increase in seven years and will go into effect with the December 2018 benefits, which are payable in January 2019.
Here is some more information on how the 2.8% increase was calculated.
2) The maximum monthly payout at Normal Retirement Age has increased
For 2019, the maximum monthly payout for a retired worker at Normal Retirement Age is $2,861. This is a $73 per month ($876 per year) increase over 2018 ($2,788). The Social Security Administration typically computes the Primary Insurance Amount (PIA) by evaluating Average Indexed Monthly Earnings (AIME). This process reflects the change in general wage levels that occurred during the recipient’s years of employment. The indexation ensures that future benefits reflect the general rise in the standard of living that occurred during recipient’s working lifetime.
Learn more about Social Security Benefit Amounts
3) Social Security Disability Insurance recipients will receive an increase in benefits
Many of the 10 million Americans who qualify for Social Security Disability Insurance (SSDI) will see their benefits increasing in 2019. The legally blind will receive an increase of $70 per month from a maximum of $1,970 (2018) to $2,040 (2019). The non-blind will receive an increase of $40 per month from a maximum of $1,180 (2018) to $1,220 (2019).
Read more about eligibility process for disability benefits
4) Exempt amounts under the earnings test will increase
This is good news for those claiming Social Security benefits while still working. In 2018, the Social Security Administration would withhold $1 of benefits for every $2 of earned income over $17,040 for individuals who had not reached their Normal Retirement Age. In 2019, the income threshold rose to $17,640. If, however, you expect to reach your Normal Retirement Age in 2019, then your threshold increased to $46,920 for the months prior to your birthday. The government will withhold $1 for every $3 of earned income above this threshold.
All of this is just temporary. Once you hit your Normal Retirement Age, you begin to receive any funds withheld. A recalculation of the benefit rate will remove the applied percentage reduction.
Here is some additional information on how the earnings test works
Negative Changes to Social Security
5) The Normal Retirement Age will rise. Again.
The Social Security Administration determines your Normal Retirement Age based on the year you were born. In 2019, the Normal Retirement Age will increase by 2 months to 66.5 years old. This increase is part of an ongoing process to raise the Normal Retirement Age to age 67 by 2022 for those of us born in 1960 or later.
6) High-income earners are about to pay more in Social Security taxes
Effective January 1, 2019, high-income earners must pay Social Security taxes on the first $132,900 of income. That is an increase of $4,500 from the 2018 limit of $128,400. Salaried workers pay a 6.2% tax on that extra $4,500 (about $279), while their employer pays and additional 6.2%. If you are self-employed, this increase is going to hurt twice as bad. Self-employed workers, since they don’t have an employer to share the obligation, are responsible for the entire 12.4% tax (about $558).
Here is a brief history of the Contribution and Benefit Base
7) Qualifying for Social Security will become harder
In order to qualify for Social Security benefits, you must be a U.S. citizen who has earned 40 Social Security credits. Each Social Security credit is legally called a Quarter of Coverage (QC) and QCs the basic unit for determining whether a worker is qualified. A maximum of 4 QC’s can be earned in one year, regardless of your income. The amount of earnings required for a QC in 2019 is $1,360. This is a $40 increase from the amount of earnings required for a QC in 2018 ($1,320).
Here is an explanation of the “Quarter of Coverage” calculations
Bonus Update:
Your new Medicare card will no longer have your Social Security number on it
For those of you on Medicare, be on the lookout for your new Medicare card that will no longer display your Social Security number (SSN). A unique, randomly assigned number called a Medicare Beneficiary Identifier (MBI) will replace the SSN-based Health Insurance Claim Number (HICN) and should have been mailed in all states before January 1, 2019.
Here is the press release from the Office of the Inspector General
Richard has been conducting research on Retirement Insurance for more than 20 years. He received his Master of Accountancy (MAcc) in 1998 and is a licensed Certified Public Accountant (CPA). In the aftermath of the 2008 financial crisis, Richard found himself surrounded by friends and family who were concerned about their retirement and how they would be able to afford a comfortable life during their golden years.