The Social Security Administration recently announced the 2019 Cost-of-Living Adjustment (COLA). Starting January 2019 Social Security beneficiaries will receive a 2.8% increase in benefits, which is 0.8% higher than the 2018 increase of 2.0%.
In addition, the Social Security wage base will increase by 3.5%, from $128,400 to $132,900. The Social Security wage base is the maximum amount of wages subject to the 6.20% Social Security tax. The 1.45% Medicare tax, on the other hand, will continue to apply to all wages.
The earnings limit for workers younger than full retirement age (FRA) will also increase from $17,040 to $17,640. This means that an individual who starts collecting Social Security benefits prior to their full retirement age (determined by birth year) and continues to work may have their benefits reduced if their earnings exceed $17,640 for the year. When earnings exceed the $17,640 threshold the Social Security income will decrease by one dollar for every two dollars earned. Therefore, Social Security beneficiaries are still better off by continuing to work. However, if a beneficiary takes their benefits early and has earnings that exceed the threshold they should be prepared to repay some or all of their Social Security income.