What To Expect From Social Security in 2022
Social Security has been around since 1935, but there are still changes to the program every year. One of the biggest headline grabbers for 2022 is the big jump in payouts due to the annual cost-of-living adjustment. But there are a number of other significant changes to the program that you should be aware of for 2022, whether you’re already retired, nearing retirement or just beginning your working career. Here’s a short list of the major changes to expect from Social Security for 2022.
For 2022, Social Security recipients earn a significant 5.9% increase in the amount of their annual payouts. The same increase applies to those earning Supplemental Security Income payments. More than 64 million Social Security beneficiaries will see that increase applied to their January 2022 checks and for the remainder of the year. This will be the biggest COLA in 40 years, since the 11.2% increase in 1981. The downside of any COLA, of course, is that it’s a response to rising inflation, meaning Social Security recipients face higher costs with their increased payouts.
Raise in Social Security Wage Base
Social Security payments to retirees are primarily funded by taxes on existing workers. However, workers are only taxed on a portion of their wages, known as the Social Security wage base. Just like the annual COLA, the Social Security wage base is subject to annual changes. For 2022, the wage base is $147,000, up significantly from 2021’s $142,800. This means that workers pay Old Age, Survivors and Disability Insurance tax of 6.2% on the first $147,000 of their wages only. Earnings above that are tax-free for Social Security purposes.
Adjustment in Full Retirement Age
The earliest any retiree can claim their Social Security benefits is age 62. Full retirement age has varied over the years, depending on the date of birth of the recipient. As of 2022, those born in 1960 are able to claim Social Security for the first time, if they desire, as they turn 62. According to the Social Security Administration, full retirement age becomes 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 able to claim Social Security in 2021.
Earnings Limit Increased After Claiming Benefits
You can continue to work after you claim your Social Security benefits, but if you earn over certain limits, your payout will be temporarily reduced. For 2021, benefits were reduced by $1 for every $2 a worker earned above $18,960, if they were still under full retirement age. In 2022, that limit increases to $19,560. If you reach full retirement age in 2022, your earnings limit jumps to $51,960, up from $50,520 in 2021. Benefits for these workers are reduced by $1 for every $3 above this limit. Once you reach full retirement age, there are no reductions to your Social Security benefits, regardless of how much you earn. Workers are made whole for any benefit reductions due to excess earnings once they reach retirement age in the form of increased payments.
Maximum Social Security Payout Increases
The amount you earn when you claim Social Security is based on a combination of your lifelong earnings record and the age at which you file for benefits. The more you earn, and the later you wait to file, the higher your payout will be. For 2022, the maximum possible Social Security payout for a recipient filing at 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 record of your lifelong earnings history and an estimate of your potential payouts at age 62, your full retirement age or age 70. If you’re age 60 or above and don’t have an online account, the SSA will mail you a physical statement three months before your birthday every year.
6 Key Steps You Can Take Today to Retire a Millionaire
Looking to retire comfortably? Take these steps now.
More From GOBankingRates