The Social Security Administration (SSA) announced a cost-of-living adjustment (COLA) of 5.9% for Social Security payments, the largest since 1982. This increase will take effect in January 2022 for the 62 million Americans who receive Social Security payments. SSA said SSI recipients would see their benefits increase effective Dec. 30, 2021. Here are three major Social Security Changes that many Americans should expect next year.
Workers To Pay More Taxes
Most contemporary workers pay Social Security taxes on all of their earnings. But this is not the case for everyone. Some persons earn more than the “wage base” limit, which is the annual income subject to Social Security tax. Any money earned over the wage base limit is neither taxed or taken into account for calculating retirement benefits.
In 2022, the salary base limit will change. Hence, Forbes said some high earners need to pay higher taxes. The highest pay subject to Social Security tax in 2021 was $142,800, but in 2022 it will rise to $147,000. Employees pay a 7.65% Social Security tax, which means they might owe up to $321.30 in additional taxes. Because they don’t have an employer to pay half of their Social Security tax, self-employed people pay double that amount and might wind up paying $642.60 more over the year.
Current and future retirees should be aware of the changes to anticipate how their tax payments and benefit checks will be affected.
Retirees Can Work More Without Harming Benefits
Motley Fool said Every retiree has a full retirement age (FRA), which for individuals attaining FRA next year will be between 66 and four months and 67. If you haven’t reached your FRA yet, you can still collect retirement benefits if you’re at least 62 years old. However, this would involve a reduction in your monthly payments.
If you’re receiving benefits before to FRA, you should be aware of a caveat. If you work too many hours and earn too much money, you can lose some of your Social Security benefits. The good news is that a reform coming next year will allow seniors to earn a little more money without losing their benefits.
In 2021, older employees who didn’t meet FRA for the full year were permitted to earn up to $18,960 before forfeiting $1 for every $2 earned over FRA. That figure will rise to $19,560 in 2022. In 2021, the earnings ceiling for people who will reach FRA during the year was $50,520, beyond which benefits would be decreased by $1 for every $3 in excess earnings. In 2022, this will increase to $51,960.
Seniors Will Receive Bigger Checks
Retirees get a cost of living adjustment (COLA) every year, which raises the size of their cheques. In 2022, this will be the situation. In fact, Forbes said seniors would receive the highest COLA in 40 years, with a 5.9% increase in their benefits.
— Mutual of America Financial Group (@MutualofAmerica) October 18, 2021
This means that the average payout will rise from $1,565 in 2021 to $1,657 in 2022 for all retired employees. While it’s great that seniors would get this extra cash to keep their benefits from losing purchasing power, retirees shouldn’t get too enthusiastic because the boost is so significant due of rising inflation.
Retirees must carefully budget to account for the additional expenditures they’ll pay due to increased prices, so they can make the most of their larger checks.