Social Security has been around since 1935, but there are still changes to the program every year. One of the biggest headliners for 2022 is the big jump in payouts due to the annual cost of living adjustment. But there are a number of other significant program changes that you should be aware of before 2022, whether you are already retired, nearing retirement, or just starting your working career. Here’s a short list of the most important changes you can expect Social Security before 2022.
Cost of Living Adjustment
By 2022, Social Security recipients will earn a significant 5.9% increase in the amount of their annual payouts. The same increase applies to those who earn additional collateral income. More than 64 million Social Security beneficiaries will see that increase applied to their checks in January 2022 and for the rest of the year. This will be the largest COLA in 40 years, since its rise of 11.2% in 1981. The downside of any COLA, of course, is that it is a response to rising inflation, meaning Social Security recipients face higher costs. will get because of their higher payouts. .
Increase in the social security wage base
Social Security benefits to retirees are primarily financed by taxes on existing employees. However, employees are only taxed on part of their wages, the so-called social security wage base. Like the annual COLA, the Social Security wage base is subject to annual changes. For 2022, the wage base is $147,000, significantly higher than the $142,800 in 2021. This means that employees pay a 6.2% old-age, survivor, and disability insurance tax on only the first $147,000 of their wages. Income above that is tax-free for social security purposes.
Are you doomed to work forever? What You Can Do If Your Social Security Isn’t Enough?
Adjustment in full retirement age
The earliest retiree to claim his Social Security benefits is 62 years old. The full retirement age has changed over the years depending on the recipient’s date of birth. From 2022, those born in 1960 will be able to claim Social Security for the first time when they turn 62. According to the Social Security Administration, the full retirement age will be 67 for those born in 1960 or later. This is an increase from the full retirement age of 66 years and 10 months for those born in 1959 who were first eligible for Social Security in 2021.
Checking out: All States That Don’t Tax Social Security
Income limit increased after claiming benefits
You can continue to work after applying for your Social Security benefits, but if you earn above certain limits, your payout will be temporarily reduced. For 2021, benefits were reduced by $1 for every $2 an employee earned over $18,960 while under full retirement age. In 2022, that limit will increase to $19,560. If you reach full retirement age in 2022, your income limit will rise to $51,960, up from $50,520 in 2021. Benefits for these employees are reduced by $1 for every $3 above this limit. Once you reach full retirement age, your Social Security benefits will not be reduced, regardless of how much you earn. Employees are compensated for any reductions in benefits due to excess earnings once they reach retirement age in the form of increased payments.
Maximum Social Security payout
The amount you earn when you claim Social Security is based on a combination of your lifetime income and the age at which you claim benefits. The more you earn and the later you wait to submit, the higher your payout will be. For 2022, the maximum possible Social Security payout for a recipient filing full retirement age is $3,345, up from $3,148 in 2021.
Where to Find Your Social Security Information
The easiest and best way to find your current Social Security information is to create a “My Social Security” account at SSA.gov. Some of the information you can find on the site includes a breakdown of your lifetime earnings history and an estimate of your potential payouts at age 62, your full retirement age, or age 70. If you are 60 or older and do not have an online account, the SSA will send you a physical statement three months before your birthday each year.
More from GOBankingRates