Rodney S. Morris | Special to the Fort Leavenworth Lamp

Social Security is perhaps the single most necessary and important social program in our entire country.

According to the Center for Budget and Policy Priorities, Social Security keeps more than 15 million retired workers and 22.1 million beneficiaries away from poverty. Statistics show that three of every five retired workers rely on their Social Security benefit checks to provide at least half of their monthly income.

Because of its importance to our aging population, the disabled and survivors for deceased workers, cost of living allowances are welcome news for those drawing or about to draw Social Security.

A 2.8 percent cost-of-living adjustment was approved for 2019 and is paying out with the January 2019 benefit payment. The Social Security Administration estimates the average benefit paid to beneficiaries will increase from $1,422 to $1,461 as a result. The estimated monthly increase is $39, or $468 a year. This is the largest COLA adjustment to Social Security since 2011.

“The 2.8 percent COLA approved brings needed income security to those Social Security beneficiaries and their families who depend on their earned, modest benefits,” said AARP Chief Executive Officer Jo Ann Jenkins. “The COLA is particularly important for the tens of millions of families who depend on Social Security for all or most of their income, many of whom may have lost ground during the Great Recession. Unfortunately, the cost of living increase may not adequately cover their expenses that rise faster than inflation including health, prescription drugs, and utility and housing costs.”

Unfortunately, that may be true this year as well. There is also a slight rise in monthly premium costs for Medicare Part B in 2019. The Medicare Part B premium is up from $134 in 2018 to $135 in 2019. According to Nancy Altman, president of Social Security Works, that means those who are 65 or older could see the majority of the Social Security COLA benefit get lost in the Medicare increases.

If you were already paying $134 monthly in 2018, then your Social Security increase will more than offset the Part B increase. However, if you’re paying less because of the “hold harmless” provision, designed to keep Part B premiums from increasing in dollar amounts by more than Social Security checks in the past, then as Altman eluded to, you could see most or even all of your Social Security increase go to Medicare premiums.

Social Security is funded by wages earned by workers and employers. Every year employees pay a 6.2 percent Social Security tax, while employers do the same on the employee’s behalf for a total tax of 12.4 percent. Those who are self-employed pay the entire 12.4 percent Social Security tax. The maximum amount of earned income that is taxed for social security in 2019 has increased $4,500 to $132,900. In other words, those earning $150,000 will only pay Social Security tax on the $132,900 of earning and not the remaining $17,100.

Another change is that Social Security requires more earnings per credit for 2019. This means that when an employee earns one credit (three months of earnings), he or she will now have to earn $1,360 during that quarter for it to count, up from $1,320 in 2018. A minimum of 40 credits must be earned to be considered eligible for Social Security benefits. It generally takes about 10 years of consistent employment to earn 40 credits assuming the maximum four per year is earned.

Lastly, the maximum Social Security benefit will increase by $73. That means someone retiring in 2019 at full retirement age would earn a maximum of $2,861. Someone waiting until age 70 (year 2023), the maximum age to begin receiving benefits, would earn $3,776.52 (plus COLA increases over those years). That’s about an 8 percent increase in payment each year a recipient waits to draw benefits.

Big Social Security changes are here for 2019. It doesn’t matter if you are retired, about to retire or a ways from retirement, the changes affect you. It is important for you to understand the changes and plan for them accordingly.

Editor’s note: When he’s not sharing financial advice, Rodney S. Morris is an assistant professor for the Advanced Operations Course, Department of Distance Education, Command and General Staff College.