3 social security changes coming in 2022
SSocial security has been around for decades. And yet the program is still undergoing its fair share of changes. Here are a few important ones that workers and seniors can expect this year.
1. A huge increase for (some) beneficiaries
At the end of 2021, the average monthly Social Security benefit was $ 1,565. In 2022, it will rise to $ 1,657. We can thank the biggest cost of living adjustment (COLA) in decades for that.
You may have noticed that inflation was rampant in the second half of 2021. The rising cost of consumer goods may have hit many people hard, but it has also caused recipients of Social Security get an impressive 5.9% increase in 2022. As a result, the average monthly benefit will increase by $ 92.
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But not so fast. As the average benefit increases (a lot), Medicare Part B premiums follow suit. As a reminder, Medicare Part A, which covers hospital care, is free for most registrants. But Part B, which covers outpatient care, comes at a cost.
Seniors who are enrolled in Medicare and Social Security pay their Part B premiums on their benefits. Since Part B grows by $ 21.60 per month in 2022, seniors with Medicare won’t see the full impact of this year’s COLA.
2. A higher income limit
Elderly people benefiting from social security are allowed to work while receiving benefits. Those who do so at or beyond full retirement age (FRA) don’t have to worry about how much they earn. But those who work and apply for benefits before FRA are subject to an annual income limit.
By 2021, seniors could earn up to $ 18,960 a year without impacting their Social Security benefits. In 2022, this threshold has increased to $ 19,560. Income beyond this point could result in withholding of some Social Security income.
Income test limits are different for those who reach FRA in 2022. Last year, seniors in this boat could earn up to $ 50,520 without affecting their benefits. This year, that threshold is $ 51,960.
3. Higher social charges
Social Security derives most of its income from social charges. The highest earners do not necessarily pay these taxes on all of their income, as there is a salary cap that comes into play every year.
In 2021, income over $ 142,800 was not taxed for Social Security purposes. This year, the salary cap has been increased to $ 147,000, leaving workers who earn that much, or more, liable to tax on additional income of $ 4,200.
To be clear, this change will not impact the average American worker. But those who earn higher wages are likely to be unhappy with paying more payroll taxes. This particularly applies to the self-employed, as they do not share their social security tax burden with their employers.
These are just a few of the changes Social Security will undergo this year. Whether you’re still working or preparing to purchase benefits soon, it’s worth continuing to educate yourself about the program so you know what to expect.
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