January 21, 2022

A look at changes for 2022

It has been my habit for the past 24 years to write a year-end column summarizing the Social Security changes and updates planned for the following year.

Nearly all Social Security beneficiaries are familiar with the most popular and publicized upcoming change: the increase in monthly benefit checks for 2022 due to the Automated Cost of Living Adjustment, or COLA. In fact, Social Security recipients have likely already received a letter from the Social Security Administration informing them of the expected increase.

All Social Security checks will increase by 5.9% in 2022. The COLA is based on something called the Consumer Price Index for urban wage earners and white-collar workers. This is the official yardstick that the SSA has used to determine COLAs for the past 47 years. To learn more about this measure, check out the website of the people who enforce it: the Bureau of Labor Statistics. You can find them on www.bls.gov.

While this is the biggest increase in many decades, I’m always afraid to mention COLAs in this column because every time I do, I’m inundated with emails from readers complaining that the increase isn’t enough.

But here’s the problem: Many economists and social planners believe that Social Security COLAs are too generous! (I’ve explained why in previous columns, but don’t have the space today to get into that argument.) That’s why most discussions about long-term social security reforms include proposals to reduce the rise in the cost of living.

OK, back to the 2022 Social Security COLA. As a result of these increases, the average monthly retirement check will be $1,657 in 2022, an increase of nearly $100 from the 2021 level. The maximum Social Security check for an employee who reaching full retirement age (FRA) in 2022 will be $3,345, compared to $3,148 in 2021. Keep in mind that $3,345 is the maximum for someone who reaches full retirement age in 2022. That doesn’t mean it’s the maximum Social Security benefit that anyone can receive. There are millions of Social Security beneficiaries who get much more than that, mainly because they have worked well past their FRA and/or have deferred benefits until age 70.

While this is a Social Security column, I should mention the impending increase in the Medicare Part B premium, which is deducted from Social Security checks for most people. In 2022, the base premium for Part B will be $170.10, an increase of $21.60 from the 2021 rate. As has been the case for 20 years, wealthy people pay more than the base premium.

I don’t want to get into this complicated issue of Medicare premiums, except to make this quick point. Even though they are interconnected in the minds of most older adults, Social Security and Medicare are completely separate programs, administered by completely separate federal agencies, and they have completely separate rules and regulations regarding their benefit and payment structures. For example, I’ve already explained how Social Security COLAs are calculated. The Part B Medicare premium increase has nothing to do with the CPI. Instead, by law, it must be set at a level that covers 25% of the cost of running the program. Taxpayers collect the remaining 75%. (Again, rich people pay more than the 25% share.)

Another measure, called the “national wage index,” is used to determine increases for other provisions of the law that affect Social Security beneficiaries and taxpayers. This includes, in particular, increases in the amount of self-employed wages or income subject to social security tax; the amount of income needed to earn a “quarter of coverage”; and social security fines.

Social Security’s taxable income base will increase from $142,800 in 2021 to $147,000 in 2022. In other words, people who earn more than $147,000 in 2022 will no longer deduct Social Security taxes from their paychecks once they reach that threshold. This has always been a very controversial provision of the law. (Bill Gates pays the same amount in Social Security taxes as his plumber!) I think it’s a fair bet that any Social Security reform package, if any, will include an increase in that wage base.

Most people need 40 Social Security work credits (sometimes called “quarters of coverage”) to qualify for the system’s monthly benefit checks. In 2021, people who were employed earned one credit for every $1,470 in Social Security taxable income. But no one earns more than four credits a year. In other words, once you earn $5,880, your Social Security record is credited with the maximum four credits or quarters of coverage. In 2022, the one credit limit will go up to $1,510, meaning you’ll need to earn $6,040 over the next year before you get the maximum four credits allotted to your Social Security account.

People under their full retirement age who receive Social Security pensions or survivor benefits, but who are still working, are subject to limits on how much money they can earn and still receive all of their Social Security checks. That limit was $18,960 in 2021 and will be $19,560 in 2022. For every two dollars someone earns above those limits, one dollar is withheld from his or her monthly benefit.

There is a higher income threshold in the year a person reaches full retirement age, which applies from the beginning of the year until the month the person reaches FRA. (The income penalty disappears once someone reaches that magical age.) That threshold rises from $50,520 in 2021 to $51,960 in 2022.

A number of other social security provisions are also affected by inflationary increases. For example, people who receive disability benefits and try to work can generally continue to receive that benefit as long as they do not work at a “substantial” level. In 2021, the law defined substantial work as any job that paid $1,310 or more per month. By 2022, that substantial level of income will rise to $1,350 per month.

Finally, the federal basic payment level of supplemental security income for one person will increase from $794 in 2021 to $841 in 2022. SSI is a federal welfare program administered by the SSA, but it is not a Social Security benefit. It is paid from general income, not Social Security taxes.

If you have a Social Security question, Tom Margenau has a book with all the answers. It is called Social Security – simple and smart. You can find the book at www.creators.com/books. Or search for it on Amazon or other bookstores. To learn more about Tom Margenau and to read past columns and see features from other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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