(Sam Swenson, CFA, CPA)
One of the few positive byproducts of soaring inflation is that the Social Security Administration (SSA) noticed it and did something about it. As a result, a number of important changes are happening to a Social Security statement near you in 2022.
Here, we’ll take a look at five major Social Security changes you should have on your radar.
1. A cost of living adjustment of 5.9%
Heading the major changes that will occur in 2022, the SSA has announced that all beneficiaries will receive a 5.9% increase in their monthly benefit checks starting next year. This increase is designed to help retirees maintain their purchasing power amid rising prices across the economy. Remember that even though you will receive more, your ability to purchase goods and services really hasn’t changed much from the previous year, but it’s still something to appreciate.
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2. Social security salary base increases
The SSA collects its premiums for its Old Age, Survivors and Disability Insurance Program (OASDI) by taxing 6.2% of your salary base, up to a certain amount. In 2021, that amount was $ 142,800, and in 2022, it will increase to $ 147,000. Indeed, all salaries up to $ 147,000 will be taxed at a rate of 6.2%, while amounts earned above this threshold will not be subject to Social Security tax. All of this to say that more of your income will be taxable, and it’s important to know why.
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3. The full retirement age (FRA) rises to 67 for those who will turn 62 in 2022
The age at which you can claim a full pension increases to 67 in 2022; this applies to anyone born in 1960 or later. This means that if you turn 62 in 2022, you will be facing a full retirement age of 67, which is only a few months older than those born between 1955 and 1959. Although it is not a Huge difference to the individual if we are only talking about months it has a measurable financial impact when applied to the entire burgeoning retiree population.
4. You can earn more in retirement without losing your early benefits
If you haven’t reached full retirement age and won’t do so until after 2022, you can earn up to $ 19,560 ($ 1,630 per month) without receiving a reduction in benefits. social Security. This is a slight increase from 2021, when you could earn up to $ 18,960 ($ 1,580 per month) without seeing any reduction.
If you reach full retirement age in 2022, you can earn up to $ 51,960 in the period in 2022 before reaching full retirement age (up from $ 50,520 in 2021) without seeing your social security checks docked.
If you wait until full retirement age to claim benefits, the SSA will never take work-based benefits away from you. It is another advantage of waiting to apply for benefits if you have the chance to do so.
5. Medicare Part B monthly premiums will increase by 14.5%
Although this is an entirely separate program, SSA’s Medicare program will also see cost increases in 2022. Monthly premiums for Medicare Part B – which pay for medical insurance – are expected to increase by 14 , 5% in 2022, from $ 148.50 to $ 170.10.
This is mainly due to increased use in the healthcare universe, coupled with general increases in costs. Importantly, this increase is the largest in the history of Medicare and certainly reflects the times in which we live.
You will pay more, but you will also get more
Salary base increases, as do standardized FRA and Medicare Part B premiums. Overall, this means you’ll be paying more into the system than ever before. This is necessary for a number of reasons, but mainly to increase the amount available in reserve funds and to accommodate our national fight against inflation.
However, the SSA increases benefit payments and allows early claimants to earn more money in retirement without affecting monthly benefit checks. These changes should be accepted with joy and recognized as positive progress.
Be very clear on how these changes will affect you in 2022 and be sure to fit them into your budget.
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