Social Security COLA for 2019 will be 2.8 percent

It's the largest annual cost-of-living increase in benefits since 2012

Oct 11, 2018 @ 8:52 am

By Mary Beth Franklin

The Social Security Administration announced Thursday that 63 million beneficiaries, including retirees, disabled workers and their eligible dependents and surviving family members, will receive a 2.8% increase in benefits next year, the largest annual cost-of-living adjustment since 2012.

A 2.8% increase would boost the average Social Security benefit by $39 to $1,461 per month next year and increase the maximum benefit for someone who retires at full retirement age by about $73 to $2,861 per month in 2019. The 2.8% COLA for 2019 follows a 2% increase this year. Previously, Social Security benefits increased a meager 0.3% in 2017. There was no increase in benefits in 2016.

The average and maximum Social Security benefits do not include delayed retirement credits. Social Security recipients who delay claiming benefits beyond full retirement age earn an additional 8% per year for every year they postpone benefits up to age 70. Those who retire before full retirement age receive reduced benefits for the rest of their life.

The cost-of-living adjustment also affects the amount that Social Security recipients who claim benefits before full retirement age can earn without forfeiting any benefits, as well as the amount of payroll taxes that high-income workers will be subject to next year.

The earnings limit for individuals who claim Social Security benefit before their full retirement age will increase to $17,640 in 2019, up from $17,040 this year. Individuals who are under full retirement age for all of 2019 will lose $1 in benefits for every two dollars earned over $17,640 next year.

The earnings restrictions apply only to salaries and wages, not investments, pensions or other types of income. However, the restrictions apply to anyone — including retirees, spouses, survivors and dependents — who collects Social Security benefits before their full retirement age while they continue to work.

A higher earnings limit applies in the year a beneficiary reaches full retirement age. In the months preceding his or her 66th birthday, individuals can earn up to $46,920 in 2019, up from $45,360 this year. Individuals would forfeit $1 in benefits for every $3 earned over that limit in 2019.

The earnings restrictions disappear at full retirement age, meaning an individual could earn any amount of money without sacrificing benefits once he or she turns 66. Benefits lost to the earnings cap are restored at full retirement age in the form of higher monthly benefits.

Next year, the maximum wage base subject to FICA taxes that fund Social Security and Medicare will increase by $4,500 to $132,900. Employers and employees each pay 7.65% of their gross wages up to the maximum taxable wage base. Self-employed individuals pay the combined employer/employee rate of 15.3%.

An estimated 175 million workers are covered by Social Security. About 18% earn more than the current maximum taxable wage of $128,400 in 2018 and will pay higher payroll taxes next year. The $4,500 boost in the maximum taxable wage base means some employees could pay an additional $344.25 in FICA taxes next year and self-employed workers an extra $688.50 in 2019.

All earnings — even those above next year's $132,900 maximum wage — are subject to the 1.45% portion of the FICA tax that funds Medicare. Plus, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9% in Medicare taxes.

Many retirees should see a real increase in their net Social Security benefits in 2019, unlike this year, when their 2% COLA was nearly wiped out by a $25 increase in monthly Medicare premiums. Premiums for Medicare Part B, which covers doctors' fees and outpatient services, are usually deducted directly from monthly Social Security benefits.

The latest Medicare Trustees' report projects that basic Medicare Part B premiums will increase by about $1.50 a month, to $135.50, in 2019. The official Medicare premiums will be announced in the fall. High-income retirees pay more, in some cases much more, for the same Medicare coverage.

Individuals with modified adjusted gross income of $85,000 or more and married couples whose joint income exceeds $170,000 pay a high-income surcharge on both their Medicare Part B premiums and Part D prescription drug plans. Surcharges, officially known as an income-related monthly adjustment amount, or IRMAA, are based on the last available income tax return. Premium surcharges for 2019, which will be announced in December, will be based on 2017 income.

0
Comments

What do you think?

View comments

Upcoming event

Nov 13

Conference

Top Advisory Firm Summit

Formerly known as the Best Practices Workshop, this new one-day conference will also include content from the Best Places to Work event!The Top Advisory Firm Summit will provide CEOs, COOs, CTOs, CMOs, and Managing Partners from the... Learn more

Most watched

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

Latest news & opinion

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

4 strategies for Roth conversions

There's never been a better time to do a Roth conversion, and here are several ways to go about it.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print