More than 60 million people rely on Social Security for income to support themselves financially. While the majority of those receiving Social Security payments are retired workers and their spouses, the program encompasses far more people. It provides benefits to surviving spouses and other eligible family members after a retired worker passes away. It also pays out disability benefits to disabled workers and their families in the event that an illness or injury makes it impossible for the worker to remain in gainful employment. All in all, Social Security paid out almost $1 trillion to recipients over the past year, and that amount is likely to increase in years to come.

Every year, Social Security goes through changes. Many adjustments are relatively minor and unimportant, but there are some changes that participants should take note of to maximize their benefits. We'll explain the changes in store for Social Security in 2019 to keep you posted on what to expect from the benefits that you and your loved ones are eligible to receive.

Social Security card embedded in a spread-out stack of U.S. currency.

Image source: Getty Images.

The basics of the federal Social Security program

From its origins back in the 1930s in the aftermath of the Great Depression, Social Security has grown into one of the most important government programs in existence. Social Security was founded to pay money to older Americans after they had retired from their long careers. Over time, the program expanded in several ways. Spouses and other family members became entitled to receive benefits based on a worker's earnings record. Workers who became permanently disabled during their careers became eligible to receive disability benefits from Social Security.

Social Security pays out monthly income to eligible beneficiaries, with the amount determined based on a number of factors, including how long you worked, what your earnings were, what type of benefits you're claiming under the program, and when you apply to start receiving those benefits. All in all, Social Security provides a key supplement to the income of all of its recipients, and for many, Social Security is their primary source of cash to fund living expenses. 

What changes does Social Security make every year?

Social Security has been one of the most stable government programs over time, paying out benefits uninterrupted for decades. Yet as part of the Social Security program, there are several aspects that change slightly every year. Many of these adjustments are intended to help Social Security keep fulfilling its mission of providing meaningful financial support to its participants, with regular annual changes to make sure the program keeps up with the times. These factors include the following:

  • The annual cost-of-living adjustment (COLA) to each Social Security recipient's benefits.
  • The average benefit that a Social Security recipient can expect to receive.
  • The maximum benefit that Social Security will pay in that given year.
  • The threshold amounts that help determine benefit amounts.
  • The maximum amount of worker income subject to Social Security payroll taxation.
  • How much in earnings it takes to get a Social Security credit in qualifying for benefits.
  • What the earnings limits are, above which Social Security recipients could forfeit a portion of their benefits.
  • The thresholds for how much those receiving Social Security disability benefits can earn without disqualifying them from future payments.
  • The standard federal payment and related limits to Supplemental Security Income benefits.
  • The full retirement age for those turning 62 in 2019.

We'll look at each of these factors one by one below.

The annual cost-of-living adjustment to Social Security benefits

One of the most important aspects of Social Security benefits is that they're tied to inflation. Every year, the Social Security Administration calculates the appropriate cost-of-living adjustment (COLA) to the previous year's benefits by looking at a measure of inflation known as the CPI-W. This index, which measures the prices that urban wage earners and clerical workers pay for a common basket of goods and services, tends to rise over time, but the increases can vary widely. Over the past decade, some years recipients got no cost-of-living adjustment at all, while increases have been as much as 5.8% in 2008 -- the biggest boost since the early 1980s.

In 2019, the cost-of-living increase will be 2.8%. That stems from the fact that the average CPI-W figure for the three months from July to September was 246.352, compared to an average CPI-W of 239.668 for the same three months in 2017. Divide those two numbers  to get 1.027889, which rounds to the 2.8% figure above. 

Although the gross benefit will rise by 2.8%, not all Social Security recipients will actually see an increase that large. That's because most retirees have their Medicare premiums withheld directly from their checks, so what they receive is a net amount. However, the rise in Medicare premiums for 2019 is relatively small, so most seniors should see an increase close to that 2.8% amount.

Average benefits for Social Security recipients

Admit it: You're curious about what most people get from Social Security. Each year, the SSA satisfies your curiosity by publishing average figures for Social Security benefits. Because of the cost-of-living adjustment, the average amount typically goes up each year. However, what's interesting is how much the typical monthly payout varies depending on which type of benefit you're entitled to receive.

Type of Benefit

Average Benefit Amount for January 2019

Change Due to Cost-of-Living Adjustment

Retired workers

$1,461

+$39

Aged couple, both receiving benefits

$2,448

+$67

Widowed mother + 2 children

$2,876

+$79

Surviving spouse alone

$1,386

+$38

Disabled workers

$1,234

+$34

Disabled worker + spouse and 1 or more children

$2,130

+$58

Data source: SSA.

One thing to keep in mind about these average payouts is that there are many different ways to get the same amount of money from Social Security. Because the program uses average monthly earnings over a career of as long as 35 years, someone with a longer career but lower earnings can end up getting the same benefit as someone who didn't work as long but who typically earned more each year.

The maximum amount of earnings subject to Social Security payroll tax

Social Security gets funded primarily from payroll tax that current workers pay. Employees have 6.2% of their pay withheld from their paychecks to go toward Social Security, and employers pay a matching 6.2% amount out of their own pockets. Self-employed people pay the full 12.4% amount themselves.

However, there's a maximum amount on which this tax gets imposed. This figure, called the Social Security wage base, usually rises with inflation each year. For 2019, the Social Security wage base is $132,900. That's $4,500 greater than it was in 2018, and as you can see below, the wage base has been on the rise for some time:

Year

Social Security Wage Base

2011

$106,800

2012

$110,100

2013

$113,700

2014

$117,000

2015

$118,500

2016

$118,500

2017

$127,200

2018

$128,400

2019

$132,900

Data source: SSA.

Some have advocated removing the limit entirely to give Social Security more funding. At least for now, though, there are no concrete plans to do so, and this number's very unlikely to change throughout 2019.

How does Social Security determine benefit payouts?

There's some complicated math that goes into figuring out how much every Social Security recipient is entitled to get from the program. However, the general idea is pretty simple. First, take the average monthly earnings over a 35-year career, adjusted for inflation. Then, run that average through a formula to come up with the base benefit. Finally, make any further adjustments based on the type of benefit and age at which the recipient starts claiming Social Security.

The key aspect of translating average earnings into a base benefit, better known as the primary insurance amount, is using the benefit formula with the appropriate bend points. Up to the first bend point, Social Security recipients have 90% of their average income replaced by Social Security. Between the first and second bend point, 32% of income is replaced. Anything above the second bend point translates into a 15% income replacement rate. 

For 2019, the bend points are $926 and $5,583. Those numbers are higher by $31 and $186, respectively, since 2018, meaning that most people with the same average monthly earnings who become eligible for Social Security in 2019 will make slightly more than those who became eligible in 2018.

The maximum Social Security benefit amount

What surprises many people is that there's a maximum amount of Social Security that you can receive. However, that's a natural consequence of there being a cap on the amount of earnings subject to tax. The maximum will be different depending on the age of the person. The table below gives the details:

Age When Claiming Social Security

Maximum Benefit Amount

Change from 2018

62

$2,209

+$51

65

$2,757

+$168

66

$2,861

+$73

70

$3,770

+$72

Data source: SSA.

There are two reasons for these age-based differences. First, the bend points for determining the benefit amount change every year for those turning 62, so bend points for a current 70-year-old are different than those for a current 62-year-old.

More importantly, someone claiming benefits at 62 has to accept a reduction in their monthly payout to account for the fact that they didn't wait until reaching full retirement age. That reduction is less for someone who claims at 65, and those who wait until 70 get additional credits for their retirement benefits that give them a much higher monthly check.

How much work it takes to get Social Security credits

In order to qualify for Social Security, you have to earn a certain number of credits over your lifetime. For regular retirement benefits, you'll need 40 credits. And because you can only earn a maximum of four credits each year, it'll take most people 10 years to accumulate the credits they need in order to collect Social Security checks when they retire.

So how do you earn credits? It takes a certain amount of income from wages, salaries, or other work sources to get a credit, and that amount changes each year. In 2019, you'll earn a credit for every $1,360 in earned income you have, up to a maximum of $5,440. At that point, you'll have the four-credit maximum for 2019. The $1,360-per-credit number is $40 higher than it was in 2018, but increases of that magnitude are pretty typical.

The full retirement age for those who turn 62

The age at which Social Security recipients were initially allowed to claim full retirement benefits was 65. Over time, though, that full retirement age has risen, and the higher the full retirement age is, the longer you have to wait in order to get the same level of benefits.

Those who are turning 62 in 2019 were born in 1957. As you can see in the table below, the full retirement age for those born in 1957 is two months older than it was for those born in 1956, who turned 62 in 2018.

If You Were Born In...

Then Your Full Retirement Age for Retirement or Spousal Benefits Is...

And Your Full Retirement Age for Survivor Benefits Is...

1943 to 1954

66

66

1955

66 and 2 months

66

1956

66 and 4 months

66

1957

66 and 6 months

66 and 2 months

1958

66 and 8 months

66 and 4 months

1959

66 and 10 months

66 and 6 months

1960

67

66 and 8 months

1961

67

66 and 10 months

1962 or later

67

67

Data source: SSA.

Practically speaking, a higher full retirement age results in larger reductions for claiming Social Security early, and smaller credits for delaying Social Security. However, those near retirement age now will have to deal with steady increases in the full retirement age for the next several years before it finally levels out at age 67.

How much can early retirees make before losing Social Security benefits?

Full retirement age is so important because some or all of your benefits are subject to forfeiture, or giving them up forever, if you claim Social Security before full retirement age and your earnings from work are above certain income limits. Once you reach your full retirement age, these rules go away, and you can earn as much as you want and keep all of your Social Security, too.

There are two sets of earnings limits that apply to early retirees, but they apply in different situations. If you'll be younger than full retirement age throughout 2019, then you can earn a maximum of $17,640 during the year before you give up some Social Security benefits. Above that limit, you'll lose $1 in annual benefits for every $2 of earnings. So if you earned $18,640 -- $1,000 over the limit -- you'd have to give up $500 of your annual Social Security. The $18,640 figure is $600 higher than the corresponding number was in 2018.

Those who will reach full retirement age during 2019 have a much more generous earnings test. You can earn up to $46,920 without any penalty, and it takes $3 in earnings above that limit to lose $1 of benefits. Moreover, earnings after you hit full retirement age don't count, which can be especially advantageous for those who hit that mark early in the year. The $46,920 number is $1,560 greater than it was last year.

Income limits for Social Security disability benefit recipients

Social Security disability benefits are a safety net to help you if something happens during your career that prevents you from working. These benefits are intended to kick in when you become disabled for at least a year or more and are no longer able to work. Benefits typically continue until you're able to work again on a regular basis.

In determining eligibility for disability benefits, Social Security accounts for the fact that recipients might be able to do a minimum amount of work. The SSA looks at what it calls "substantial gainful activity" -- a set maximum amount of earnings per month. Earning income above that figure will prevent you from getting benefits. Staying below it will allow you to keep getting disability checks.

For 2019, the substantial gainful activity limit for most people is $1,220 per month for those who aren't blind, up $40 from last year. Blind recipients have a higher limit of $2,040 per month, which is $70 higher than it was in 2018. Finally, the SSA allows disability benefits during a trial work period as long as earnings haven't exceeded a certain amount in nine of the past 60 months. For 2019, that limit is $880 per month, $30 higher than in 2018.

Supplemental Security Income's requirements to qualify

Finally, beyond regular Social Security, the SSA provides additional benefits to low-income retirees in need. The Supplemental Security Income program gives individuals up to $771 per month in 2019, or couples up to $1,157 per month. Those numbers are $21 and $32 higher, respectively, than they were in 2018.

To qualify, individuals must also have no more than $2,000 in assets, excluding your home, vehicle, personal effects, and certain other items like life insurance policies or burial funds. The limit for couples is $3,000.

However, most recipients don't get the full amounts listed above. That's because the standard SSI payments are reduced by what's known as countable income, which includes most income but excludes a certain base of income from work, need-based benefits, and several other sources. For instance, if countable income comes in at $300, then an individual would get $771 minus $300 or $471 per month in 2019. Even though the amounts are relatively small, they can be crucial for the low-income recipients who get them.

Let Social Security serve you in 2019

If you're eligible for benefits -- or are about to start getting them -- then it's crucial to understand how Social Security will work in 2019 and what new changes will have taken effect. That way, you'll be able to predict exactly what you'll get and then plan your finances accordingly.

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