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Social Security arguably is the most important social program in this country. Each and every month, on the other hand, is more than half of their monthly income. In turn, according to the Center for Budget and Policy Priorities, Social Security keeps more than 15 million retired workers and 22.1 million beneficiaries out of poverty.
Big changes are coming to Social Security
Given its importance to our nation's elderly, the disabled, and the survivors of deceased workers, there are simply no more important than mid-October. That's when the Social Security Administration (SSA) announces changes to America's most important social program for the upcoming year. Everything from benefits paid to qualifying guidelines have been updated.
With that being said, let's take a closer look at the seven biggest changes to Social Security in 2019.
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1. Beneficiaries are netting their biggest COLA in seven years
The highlight of the SSA's mid-October announcement is still "that" will be available in the upcoming year. This is known as "cost-of-living adjustment," or COLA, and is determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
In 2019, Social Security recipients will be receiving a 2.8% increase, which is the biggest increase since 2012. The increased cost of shelter, which includes the largest weighting of the CPI-W, also played a key role in pushing Social Security's COLA to a seven-year high.
Keep in mind that a 2.8% COLA is not exactly going to make you rich or necessarily represent the true inflation they've faced over the past year. An analysis from the Senior Citizens League found that the power of social security has declined over the last 18 years, mainly because of the CPI-Ws.
As icing on the cake, lower-income social security recipients who are also enrolled in Medicare still are likely to play catch-up with their Medicare Part B premiums. These benefits have been preserved more often in this decade, but they are more likely to have their COLA in recent years and could do the same in 2019.
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2. The rich will owe more in 2019
According to most informal polls, increasing or decreasing the maximum taxable earnings cap with Social Security's 12.4% payroll tax is the preferred solution of the American public. Although we have not yet been able to pay the price of $ 13.2 trillion cash shortfall between 2034 and 2092, the public will be happy to hear that the wealthy will pay more tax next year.
In 2018, all earned income between $ 0.01 and $ 128.400 is subject to Social Security's 12.4% payroll tax. Next year, earned income up to $ 132,900 will be subject to the payroll tax – an increase of $ 4,500. This tax cap is tied to the National Average Wage Index, which rose 3.45%, from $ 48,642.15 in 2016 to $ 50,321.89 in 2017. When rounded to the nearest 0.1%, this 3.5% increase to $ 128,400 cap, yielding the new $ 132,900 Fig.
The new earnings cap represents an increase of $ 558 in new annual tax for self-employed people. For the wealthy who are employed by someone else, it's up to a $ 279 annual increase.
For the small percentage of workers earning more than $ 132,900 in 2019, this income will be exempted from Social Security's payroll tax. An estimated $ 1.2 trillion in earnings escaped taxation in 2016, per the SSA.
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3. The maximum monthly payout at full retirement
Want the opportunity to generate a large paycheck from Social Security in Retirement? Then you'll probably be thrilled to find out that the SSA has increased the maximum monthly payout possible in 2019.
This year, they have retired $ 2,788 a month, regardless of how much they earned their income. Keep in mind that the SSA determines your full retirement benefit by taking your 35 highest-earning, inflation-adjusted years into account. In 2019, retired at $ 2,861 a month, an increase of $ 73 a month, or $ 876 a year.
However, most folks are not going to receive anywhere near this amount. That 's why they have to pay their taxes before they can pay their taxes.
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4. The full retirement age will rise, yet again
If you plan to be among the minority who wait to receive their full benefit, then understand that the wait will be a bit longer moving forward. The SSA determines your full retirement age by your birth year. If you do not know your FRA, this SSA table makes it easy to find.
For those folks born in 1957, who will be turning 62, the earliest age of eligibility for retiree benefits, in 2019, to 66 years and six months. This marks the third consecutive year that the FRA will be made by two months, with its eventual peak coming age 67 in 2022 for those born in 1960 or later.
What you really need to understand is that you are going to be eligible for a pension. In other words, you're not getting 100% of your benefit. Conversely, if you wait until after- your full retirement to your payout, you actually can earn more than 100%.
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5. Withholding thresholds for early filers have swelled
More good news: The income thresholds for retirement earnings are on the rise, once again!
Whether you are aware of this, or if you are enrolling in a social security situation, you are still working, the SSA can be any of your benefits, depending on how much you earn each year. In 2018, early filers who will not be able to earn $ 17,040 annually ($ 1,420 a month) without having any benefits withheld. But for each $ 2 in earnings above this amount, $ 1 in benefits is withheld. In 2019, this figure is rising to $ 17,640 a year, or $ 1,470 a month.
If you will be able to do so in 2018, you will be able to pay for $ 3 in earnings above $ 45,360 ($ 3,780 a month). In 2019, this figure is increasing to $ 46,920 a year, or $ 3,910 a month.
In other words, early filers who are still working less than a year later.
It's also worth mentioning that withheld Social Security benefits are not lost. They are returned in the form of a higher monthly payout than you reach your FRA. The retirement earnings test is not applicable to those who have reached their full age.
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6. Disability income thresholds will move higher
Although Social Security is predominantly a program designed to create a financial foundation for low-income and middle-income workers, it is also responsible for providing 10 million long-term disabled workers and their immediate families. Thus, changes to the income thresholds for the disabled tend to be pretty important.
In the upcoming year, non-blind Social Security Disability (SSD) recipients will be able to earn up to $ 1,220 a month without having their benefits stopped. That's a $ 40-a-month increase from 2018. As for the legally blind, they'll be able to earn $ 2,040 a month from SSD in 2019, up from $ 70 a month from the current year.
Image source: Getty Images.
7. Qualifying for Social Security just became a bit tougher
Lastly, it's going to be incrementally harder for future generations of beneficiaries to qualify for retirement benefits.
Social security is anything but that. In reality, they have increased their benefits by increasing their lifetime earnings. These credits are paid out based on your earned income. In 2018, $ 1,320 in income earned by a worker at lifetime work credit. Therefore, $ 5,280 in earnings would be your credit for the year. If you do this for 10 years, you'll qualify for a Social Security retirement benefit.
In 2019, it will take $ 1,360 in income to earn a working credit, or $ 5,440 (an extra $ 160 in income). The SSA is definitely making it workable, but the bar is on the rise.
Big changes are coming to Social Security in 2019, but now you're in the know.
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