Your Social Security benefits got a 2.8% boost next year. Here are the steps you should take now

  • The Social Security Administration announced this week that the cost-of-living adjustment to benefits will be 2.8 percent in 2019.
  • That is the biggest boost benefits have seen since 2012. Experts weigh in on how you can make sure you maximize the benefits of that boost to your monthly checks.
Social Security with dollar bills
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The Social Security Administration has announced that the cost-of-living adjustment to benefits will be 2.8 percent next year.

That is the biggest increase since 2012, when beneficiaries saw a 3.6 percent increase.

But before you celebrate, there are some things you need to keep in mind.

The average Social Security benefit in 2018 is $1,422. With the cost-of-living adjustment, that will be $1,461 per month in 2019.

That extra $39 per month will amount to $468 per year, or $936 per year for the average couple, according to David Freitag, a financial planning consultant and Social Security expert at MassMutual.

"This is real money you're talking about," Freitag said.

But retirees should take several steps to make sure they get the most out that extra income.

Check your records

The Social Security retirement benefits you receive are unique to you and your work history.

A 2.8 percent increase for someone who is getting $2,800 in benefits per month will result in a bigger bump than for someone who is receiving $1,000 per month, said Amin Dabit, director of advisory services at Personal Capital.

To understand how this change may affect you and your check, create or log in to your Social Security account online.

"To get the most accurate number on how that impacts you as an individual, it's best to go on the site and get more data for you specifically," Dabit said.

Build your overall plan

Resist the temptation to use the extra fund you receive next year to take a big trip, Freitag said.

Instead, assume the increase to your Social Security benefits will pay for necessities such as utility bills, transportation costs and taxes.

"You have to look at the bigger picture," Freitag said. "You have to look at what it amounts to annually, and, more importantly, what is the overall impact for the rest of your years in retirement."

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Keep in mind, too, that a higher benefit will affect how you take money from your different retirement accounts, including traditional pre-tax individual retirement account or post-tax Roth IRAs, Dabit said.

"It's important to look at all those different pieces in your life," Dabit said. "That way, you can try and make your money last longer over the life of your retirement."

Evaluate your personal rate of inflation

While Social Security cost-of-living adjustments are aimed at helping all retirees keep up with rising costs, your personal expenses may be going up or down at a different rate.

"Everybody's inflation rate is personal," said Scott Thoma, investment strategist at Edward Jones.

To find out how your personal costs are changing, start by tracking your budget. Then, do a check-up annually to see where you are spending more or less.

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Health-care costs are one area that consistently take up a chunk of retirement benefits for many retirees. Also take a look to see if other expenses — such as utilities or food — are taking up more of your budget.

You may spend less on discretionary areas such as travel as you age, Thoma said.

Knowing how your spending needs change will help you better allocate the money that comes in and your investments, Thoma said.

The good news for retirees this year is that Medicare Part B premiums likely won't eat up the Social Security cost-of-living adjustment in 2019.

"The Social Security COLA is going to be more than, or should be more than, what the increases in their Part B premiums are going to be in dollar terms," Thoma said. "There will be a little more money in their pockets than before."

Consider working longer

No matter your age, working even just one year longer can increase your Social Security benefits.

To calculate your benefit, the Social Security Administration takes your highest 35 years of earnings.

"If you're still earning money, Social Security is going to recompute your benefit every year," said Laurence Kotlikoff, professor of economics at Boston University and president of Economic Security Planning, a provider of financial planning tools. "If you place one of the lowest of those 35 years of indexed earnings, then your benefit will go up for the rest of your life."

That can far outweigh any extra taxes that you may have to pay, Kotlikoff said, particularly for individuals who have had significant gaps in their earnings records.


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