Here's the cap on Social Security earnings for 2019 – The Motley Fool

Social Security has announced a series of changes for 2019 that everyone should be aware of. One of the most important changes made to the program next year allows you to earn more money without reducing your income to Social Security. Keep reading to find out how much money you can earn in 2019 without jeopardizing your social security.

Social Security Income Test: How It Works

You can start receiving Social Security benefits as early as age 62, but if you claim your benefits earlier, you will receive less than if you had applied for retirement age, and you would risk a reduction in your benefits if your earnings exceed an annual limit.

The age of retirement varies, but for people born after 1954, it varies between 66 and 67 years. If you turn 62 in 2019, your retirement age is 66 and six months. Start receiving benefits sooner than this and your benefits will be reduced by five-ninths of 1% per month (6 2/3% per year) for the first 36 months of your application and five-fifths of 1% per month (5% per year) for each month beyond 36 months. For example, a person born in or after 1960 has reached the age of retirement at age 67. If she claims at the age of 62, her income to Social Security would be reduced by 30%.

In addition to reducing the number of anticipated claims, Social Security also has a income limit test for beneficiaries who have not reached retirement age, which can reduce your benefits.

The income limit changes each year according to the measure of social security inflation, the national average wage index. By 2018, you could earn up to $ 17,040 before triggering a reduction in your benefits, but in 2019 you will earn $ 17,640, or 3.5% more.

If your income exceeds $ 17,640 in 2019 and you have not reached retirement age for the year, Social Security will reduce your income by $ 1 for every $ 2 in excess of the limit.

If you reach the retirement age in 2019, you can earn up to $ 46,920 in the months preceding the retirement age. But if you earn more than that, Social Security will reduce your benefit by $ 1 for every $ 3 earned above the limit.

If your earnings exceed these limits, the discount will not apply proportionately to each monthly Social Security check. Instead, social security holds monthly checks until the amount of the reduction is satisfied, rounding up to one month because it does not pay partial monthly payments. Once the discount is satisfied, you will receive your normal monthly checks for the rest of the year.

For example, suppose Jane is 62, her social security benefits rise to $ 600 a month, and she hopes to earn $ 25,000 in 2019, which is $ 7,360 more than the allowable income limit. Social Security would retain $ 3,680 ($ 1 per $ 2 USD above the limit) by withholding payments until the end of July. In August, Jane would start receiving her regular check for $ 600 a month until the end of the year.

The reductions resulting from the income test are not lost

A common misconception is that reductions in social security earnings due to the earnings criterion are lost. This is not true.

As I mentioned, Social Security does not issue partial monthly benefit checks, which may mean that you are paying too much for reducing your pay test during a given year. . When this happens, Social Security will reimburse you the amount you overpaid the following year.

For example, in my previous example, Jane would not receive seven months of her monthly social security checks, or $ 4,200, or $ 520 more than the $ 3,680 reduction in her earnings reduction test. social Security. By 2020, she would receive a check for $ 520.

It is important to note that any reduction in your benefit resulting from the annual earnings test is added to your social security file. This means that reducing your income limit will increase the amount of social security benefits you will eventually receive at retirement age.