3 big social security changes coming in 2022
Across the United States, most Americans contribute to or receive social security benefits. This is why changes to the program can affect just about any household.
And several of those changes will happen in 2022, according to a new announcement from the Social security administration. Here are three ways the perks program will be different after the New Year.
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1. Seniors will receive larger checks
In most years, retirees receive a cost of living adjustment (COLA) that increases the amount of their checks. This will be the case in 2022. In fact, seniors will in fact benefit from the the biggest COLA in 40 years and will see a 5.9% increase in benefits.
This means that the average Social Security benefit among all retired workers will drop from $ 1,565 in 2021 to $ 1,657 in 2022. Although it is good news that seniors will get that extra money so their benefits don’t lose out. not their purchasing power, retirees should not be too excited about it because the increase is so large that it is a direct result of high inflation.
Retirees need to make sure they budget carefully to account for the additional costs they will incur as a result of rising prices in order to get the most out of their big checks.
2. Retirees can work more without affecting benefits
Each retiree has a full retirement age (FRA), which will last between 66 and four months and 67 for those reaching FRA next year. If you have not yet reached your FRA, you still have the option to apply for retirement benefits as long as you are at least 62 years old. That means reduce your monthly checks, although.
There is a caveat to whether you receive benefits before FRA. If you work and earn too much at work, you lose part of your Social security income. The good news is that a change that will happen next year will allow retirees to earn a little more money without their Social Security checks disappearing.
In 2021, older workers who would not receive FRA throughout the year were allowed to earn $ 18,960 before losing $ 1 for every $ 2 in excess earnings. In 2022, this amount will rise to $ 19,560. And for those who reach FRA during the year, the earnings limit was $ 50,520 in 2021, after which benefits would be reduced by $ 1 for every $ 3 of additional earnings. This will increase to $ 51,960 in 2022.
3. Some workers will pay more taxes on social security
Most of today’s workers pay Social Security taxes on all the money they make, but not everyone does. Some people have incomes above the âbasic salaryâ limit, which is the maximum income subject to Social Security tax each year. Any money earned above the basic salary limit is neither taxed nor taken into account when calculating pension benefits.
The basic salary limit changes in 2022, which means that some high incomes will end up being taxed more for social security. In 2021, the maximum wage subject to Social Security was $ 142,800, but it will increase to $ 147,000 in 2022. Since employees pay a Social Security tax of 7.65%, this means that workers could pay up to $ 321.30 in additional taxes. The self-employed pay double that amount because they don’t have an employer to pay half of their Social Security tax, so they could end up paying $ 642.60 more over the course of the year.
Current and future retirees should be made aware of these changes in order to be prepared for how their tax bills and benefit checks may be affected.
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