6 Social Security Changes and How They Will Impact Retirement

Jan 1, 2019 | Finances in Retirement


6 New Social Security Changes in 2019

Many retirees depend on Social Security benefits as a dependable source of retirement income. In fact, last year in 2018, around 62 million Americans, or 1 in 6 U.S. residents, collected Social Security benefits. In 2019, the number is expected to rise to 64 million Americans who will receive a total of over one trillion dollars in Social Security benefits.

The Social Security program was originally passed in 1935 to help older Americans receive money after they’d retired from their careers. The program grew and soon began to apply to spouses and other dependent family members. Today, it’s a major source of fixed income for retired Americans.

Social Security benefits are paid each month, but the amount beneficiaries receive each year changes based on several variables including your income, the type of benefits you’re claiming under the Social Security program, and when you apply to get benefits. In addition, there are changes that occur to the program each year to make sure the payment amounts reflect economic variables like inflation.

Below are 6 new Social Security changes in 2019 and how they will impact your retirement.


1.  Cost-of-Living Adjustment Increase

For the 2019 calendar year, Social Security beneficiaries will receive a 2.8% increase in the cost-of-living adjustment (COLA).

  • What’s the COLA?
    • Each year, the COLA adjusts for inflation based on a special index called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
    • The current rule is that if the CPI-W goes up by more than 0.1% over a specific time period, the Social Security payment rises in tandem by the same amount. This helps to keep benefit payments on par with rates of inflation.

For comparison in 2018, the COLA was increased by 2%. The 2019 COLA uptick is the biggest percentage gain since 2012 when benefit payments went up by 3.6%. What does that look like in an actual dollar amount? Well, for the average Social Security benefit recipient, that means $39 more per month. If you’d like to learn more about the COLA adjustment this year, SSA.gov published a COLA Fact Sheet you can use to analyze how the update will affect your personal benefit payment.

Social security changes takeaways:

  • 2018 COLA increase: average payout is $1,422
  • 2019 COLA increase: average payout is $1,461

2. Taxable Income Limit Increase

Last year in 2018, employees faced a 6.2% Social Security tax on earnings up to the maximum amount of $128,400. Note: Any income above the maximum limit set by the SSA is not taxed. So, if you had a salary of $140,000, only $128,400 would be subject to the tax and you’d have a remaining $11,600 that isn’t taxed.

This year in 2019, the tax rate remained at 6.2% but the maximum amount of taxable earnings rose to $132,900. So, using the same example salary above, you’d have $7,100 that isn’t taxed in 2019.

What does that mean for recipients of Social Security? It means there are more earnings in the program that can be used to determine retirement benefits. In 2018, the most a retired individual retiring at full retirement age could garner was $2,788. In 2019, that payment rose by $73 per month to $2,861.

This increase also means that the most you could pay for the Social Security tax as an employee is now up to $8,239 compared to $7,960 in 2019.

Social security changes takeaways:

  • 2018 maximum taxable income: $128,400
  • 2019 maximum taxable income: $132,900
  • 2018 maximum benefit for seniors retiring at full retirement age: $2,788
  • 2019 maximum benefit for seniors retiring at full retirement age: $2,861

3. Full Retirement Age Increase

Another change to Social Security benefits in 2019 is a senior’s full retirement age. Your full retirement age (FRA) is the age when you’re entitled to 100% of your Social Security benefits. If you claim your Social Security benefit before your full retirement age, you forgo your full benefit amount. For retirees who turned 62 in 2018, the full retirement age was set at 66 and 4 months. For those turning 62 in 2019, full retirement age is 66 and 6 months. Under current legislation, retirement age is set to increase by two months each year until FRA hits 67.

Social security changes takeaways:

  • Full retirement age for those turning 62 in 2018: 66 and 4 months
  • Full retirement age for those turning 62 in 2019: 66 and 6 months

4. Income Limits Increased

If you continue to work while receiving Social Security benefits, all or a portion of your benefits may be withheld temporarily – but that changes based on how much you bring home and if you’ve reached your full retirement age.

Before you reach your full retirement age:

In 2019, you can earn up to $17,640 without any deductions to your benefits before you reach your full retirement age. After that amount is surpassed, $1 will be removed from your benefit payment for every $2 that goes over the limit. Compared to 2018, the limit for the maximum income increased by $600 from $17,040.

If you’ve reached your full retirement age:

But what if you reach full retirement age in 2019? If that’s the case, you can make an income of up to $46,920 which is up by $1,560 from 2018’s limit. If your income exceeds that threshold, for every $3 you go over, your benefits will be cut by $1. Note: This will only apply to the proceeds you earn in the months before you reach your full retirement age.

Remember: After you reach your full retirement age, no benefits will be withheld if you decide to continue working.

Social security changes takeaways:

  • Pre-FRA income limit for 2018: $17,040
  • Pre-FRA income limit for 2019: $17,640
  • FRA income limit in 2018: $45,360
  • FRA income limit in 2019: $46,920

Getting Started with Reverse Mortgages

If you’re looking to get started with a reverse mortgage, these articles can help guide you through all aspects of the process.

Guide to HECM Loan                                      Reverse Mortgage Limits

Non-Borrowing Spouse Protections              Jumbo Reverse Mortgages

Reverse Mortgage Taxes                                Reverse Mortgages and Heirs

5. Social Security Disability Benefits

For Social Security beneficiaries who receive disability benefits, those payments also rose in 2019. For the legally blind, payments are now up to $2,040 per month. This is compared to $1,970 in 2018. For other disability benefit recipients, benefits went up by $40 to $1,220.

Social security changes takeaways:

  • 2018 blind disability benefit: maximum of $1,970
  • 2019 blind disability benefit: maximum of $2,040
  • 2018 non-blind disability benefit: maximum of $1,180
  • 2019 non-blind disability benefit: maximum of $1,220

6.  Online COLA Notice

In 2019, you now have the ability to view your cost-of-living adjustment online instead of solely by mail. This year, your COLA notification will still be sent by mail but you have the option of viewing it on your account at my Social Security. In the future, you can opt out of the mail option altogether and simply view your adjustment online.

7. What can you do want to maximize your benefit amount?

If you’ve read through these updates to the Social Security program and feel your payment amount won’t be enough to maintain your standard of living, you have a few options available to you.

Waiting for your full retirement age

One option is to wait for your full retirement age before taking your Social Security benefits. Although you canopt to receive your benefit payments at the age of 62, you will get a reduced amount of money permanently. If you wait for your full retirement age, you will receive 100% of your entitled benefit.

Note: The benefit amount increases each year until you reach the age of 70. At 70, there will not be any further increase to your benefits.

Although over half of future retirees will rely on Social Security benefits alone to fund their retirement, it may not be enough. An ideal retirement income strategy involves a mix of savings, an investment portfolio, and other fixed sources of income in addition to Social Security to secure your retirement.

Using other sources of income to maximize your benefits

One strategy for adding a fixed source of income to your revenue stream is by taking out a reverse mortgage loan. Curious how reverse mortgages work? Instead of a traditional mortgage where a mortgagor pays a monthly payment to gain equity in their property a reverse mortgage allows you to convert a portion of the equity you have in your home into cash you can use for anything you see fit.

  • Reverse mortgage solutions: You can use the HECM loan proceeds to delay taking your Social Security benefits, to pay for in-home care so you can comfortably age in place, or to pay for new hobbies you pursue in your leisure time.

To qualify for a reverse mortgage, you will need to have substantial equity in your home, be 62 years of age or older, and live in your home permanently. To get an estimate of the loan you may qualify for, you can use the GoodLife reverse mortgage calculator or contact one of our Reverse Mortgage Specialists.

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