2019 Updates to Social Security

Cost of Living Adjustments for Social Security

Good news! Social Security benefits are scheduled to increase by 2.8% in 2019, the biggest benefits increase since 2012. The average beneficiary – who received about $1,405 per month in 2018 – can expect to see about $468 more over the course of the year.1

Why is Social Security Increasing Benefits?

Cost of living increases are meant to cover household expenses that rise due to inflation. However, if you can absorb those additional costs, you could think about redirecting that additional payout toward helping to meet your long-term financial goals. For example, an emergency savings account or a life insurance policy may be worth the investment.

For help with investing, just give us a call: (512) 638-9499.

Additional Changes to Social Security in 2019:

Supplemental benefits paid to those who are blind or disabled will increase to $771 from $750 per individuals ($1,157 from $1,125 for couples).

If you’re currently working while receiving your social security benefits, you can earn a bit more before those benefits are reduced. Moving forward, you may now earn up to $17,640 before $1 is deducted for every $2 you earn. In the year before you turn your full retirement age, you may earn up to $46,920 before $1 is deducted for every $3 you earn, until the month you reach your full retirement age.

Finally, for those who are still working and have not yet started receiving benefits, the maximum amount of earnings subject to the Social Security tax will increase to $132,900 from $128,400.2

Proposed Increases to Social Security Earnings Cap

There are special interest groups advocating for the elimination of the earnings cap on Social Security. They are proposing this as a solution to the dwindling social security trust fund, which is expected to run out by 2034.6 The brunt of taxes dedicated to Social Security come from lower-income earners, while high earners have a lower portion of their income paid in taxes to Social Security, because they reach the earnings cap of $132,900.

In fact, due to the increase in income disparity in the United States, a much higher level of earned income is now exempted from this payroll tax compared to the 1980s – $300 billion in 1983 versus $1.2 trillion in 2016.3

Other Proposals for Social Security Insolvency

Other changes in addition to eliminating the taxable income cap have also been proposed. One option, which could benefit both the Social Security fund and individual retirees, is encouraging retirees to delay claiming Social Security benefits. For every year delayed beyond full retirement age, one’s benefits increases by 8%. Those who wait to take the benefit until age 67 receive about 43% more per month, than a retiree that took benefits at age 62. Waiting until age 70 will lead to a 75% increase in lifetime monthly benefits, relative to a 62 year old retiree.4

Social Security benefits, funding and payouts can be complex. It is worthwhile to stay abreast of the policies, changes and strategies that can help maximize your benefits. For a Complimentary Social Security Analysis, call us at: (512) 638-9499.

 

Works Cited:

  1. John Wasik. Forbes. Nov. 2, 2018. “5 Things You Should Know About Social Security Changes.” https://www.forbes.com/sites/johnwasik/2018/11/02/5-things-you-should-know-about-social-security-changes/. Accessed Nov. 9, 2018.
  2. Ibid.
  3. Sean Williams. USA Today. Nov. 9, 2018. “Why the Social Security program will never run out of cash.” https://www.usatoday.com/story/money/2018/11/09/when-does-social-security-run-out/38452267/. Accessed Nov. 9, 2018.
  4. Knowledge@Wharton. Oct. 3, 2018. “Delaying Social Security: How Lump Sum Payments Can Help.” http://knowledge.wharton.upenn.edu/article/delay-social-security/. Accessed Nov. 8, 2018.
  5. Matthew Frankel. USA Today. June 2, 2018. “47% of American pre-retirees failed this basic Social Security quiz. Can you pass it?” https://www.usatoday.com/story/money/personalfinance/retirem
    ent/2018/06/02/pre-retirees-failed-basic-social-security-quiz/35343701/. Accessed Nov. 9, 2018.
  6. 2018. “Status Of The Social Security And Medicare Programs.” https://www.ssa.gov/oact/TRSUM/. Accessed Dec. 17, 2018.