What Your Clients Need To Know About The 2019 Social Security COLA Boost
Four months after the ominous Board of Trustees report that brought concerns of insolvency to the forefront, Social Security is back in the news.
Starting January 1, 2019, the largest Cost-Of-Living Adjustment since 2012 will go into effect. The 2.8% bump will increase the estimated average monthly benefits for all retired workers from $1,422 to $1,461. The maximum monthly benefits a worker who retires at full retirement age (currently set at age 66 for anyone born between 1943 – 1954) will go up from $2,788 to $2,861. Couples who are both receiving benefits will get an estimated average of $2,448 per month, up from last year’s $2,381 average.
Changes to yearly earning limits and reductions include:
- A $1 reduction for every $2 earned about the new annual limit of $17,640 for those who claim benefits between age 62 and full retirement age. The annual limit before the 2019 COLA adjustment was $17,040.
- A $1 reduction for every $3 earned about the new annual limit of $46.920 for the year in which the beneficiary reaches full retirement age.
Historically, the Social Security Administration only counts earnings before the month an individual reaches full retirement age, at which point their benefits will no longer be reduced regardless of how much they earn per year. This will remain unchanged when the COLA increase goes into effect.
Along with the increased benefits, the SSA has also upped the maximum amount of earning that are subject to FICA tax (the 6.2% payroll tax that funds Social Security) from $128,000 to $132,900. This will see higher wage earners, those who make anywhere between the 2018 cap and next year’s threshold, contributing more in taxes than before.
So, is the 2019 COLA increase reason for retirees or those approaching retirement to celebrate? Well, yes and no. While it might not look like much on paper, an extra $39 a month could be a huge boost for someone who relies heavily on Social Security benefits. That
because COLA is designed to address inflation, that 2.8% could easily be eaten up the rising costs of food, housing, fuel, and, well just about everything else. This means that, realistically, the adjustment will likely keep the playing field level, rather than give retirees very much financial wiggle room.
Another thing to consider is that we are still at least a month away from an announcement on any changes coming to Medicare premiums for 2019, which will affect the monthly payments for those enrolled in the program. According to the Social Security Administration, beneficiaries will find out in December what their actual benefits will be for 2019.
Yes, the optics of the most significant COLA increase in seven years look good on the surface. But financial advisors should still make Social Security awareness and education a priority when interacting with clients and prospects. Because there are multiple variables involved with Social Security (when to claim, whether or not to keep working, etc.), those who don’t have a solid grasp on the program could easily miss out on strategies that will help maximize their benefit amounts.
To help, Legacy Financial Partners has put together a newly updated Overview of Social Security & Retirement Benefits guide. Designed for consumers, the guide covers the ins-and-outs of Social Security retirement benefits in a way that will help them make an informed decision as you work together on their overall plan.
If you would like to request a copy, get in touch at 877-614-0141, or email@example.com