How the 2019 Social Security Increase Will Cost Some Retirees Money

How the 2019 Social Security Increase Will Cost Some Retirees Money
Photo by Africa Studio / Shutterstock.com

Social Security recipients will enjoy a 2.8 percent increase in their benefits — the largest in seven years — in 2019. But for some recipients, this latest annual increase could end up costing them benefits.

Retirees who do not currently pay federal income taxes on their Social Security benefits may owe taxes due to the increase, which is technically known as a cost-of-living adjustment, or COLA. Retirees who already pay taxes on their benefits may owe more taxes due to the COLA.

It depends on how the COLA impacts what the Social Security Administration calls your “combined income,” a figure that reflects multiple sources of retirement income.

How Social Security benefits are taxed

The extent to which your Social Security benefits are taxable is based on your combined income. This figure comprises:

  1. Your adjusted gross income
  2. Any nontaxable interest
  3. One-half of your Social Security benefits

In other words, if you add up those three amounts, you will have your combined income.

According to the Social Security Administration, you may owe taxes on up to 50 percent of your Social Security benefits if:

  • You file a federal tax return as an individual and your combined income is between $25,000 and $34,000.
  • You file a joint return and your combined income is between $32,000 and $44,000.

You may owe taxes on up to 85 percent of your Social Security benefits if:

  • You file an individual return and your combined income is more than $34,000.
  • You file a joint return and your combined income is more than $44,000.

According to a national survey released by the nonprofit Senior Citizens League earlier this year, about 56 percent of all Social Security households pay taxes on part of their benefits.

How to minimize taxes on your Social Security benefits

Retirees who can reduce their combined income can lower the rate at which Uncle Sam taxes their Social Security benefits — or avoid taxation of their benefits entirely.

This could be as simple as withdrawing slightly less money from taxable investment accounts next year to compensate for the 2.8 percent increase in your Social Security benefits. We detail several other methods in “5 Ways to Avoid Paying Taxes on Your Social Security Benefits.”

What’s your take on taxation of Social Security income? Sound off by commenting below or over on Money Talks News’ Facebook page.

Learn everything you need to plan your dream retirement

The Only Retirement Guide You'll Ever Need gives you the knowledge you need to retire on your own terms. Sure, you can pay a financial adviser, but this online course gives you total control to create a custom retirement plan around the things that make you happy.

You're going to get expert, personalized advice. You'll have access to the latest tools. And when it's complete, you'll be able to approach your retirement confidently and with peace of mind.

It's time to plan the best years of your life. Let's get started.

Popular Articles

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

5 Secrets to Keeping Your Brain Sharp as You Age
5 Secrets to Keeping Your Brain Sharp as You Age

Forget young at heart — science says these tricks will keep you young in mind.

12 Ways Retirees Can Make Money Without Un-Retiring
12 Ways Retirees Can Make Money Without Un-Retiring

These simple ways of earning largely “passive” income can stretch your retirement dollars, cover unexpected expenses or just help you afford a few extras.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Trending Stories

Comments