With the new year approaching rapidly, there are quite a few social security changes coming in 2022. Here are some of the main changes happening next year and how they could affect your benefits moving forwards especially for those planning their retirement.
Social Security Payments Will Increase
First, the Social Security Administration (SSA) announced that Social Security payments will increase by 5.9% in 2022. This increase is aimed at combating inflation by helping people maintain their purchasing power. The 5.9% increase marks the largest Social Security cost-of-living adjustment (COLA) in almost 40 years. Given the current state of the economy, this increase is necessary for seniors to be able to retire more comfortably. This is especially true given that the U.S inflation rate rose to 6.8% in 2021, largely due to the global pandemic.
Full retirement age is increasing to 67
The full retirement age will be increasing to 67 in 2022 for those born in 1960 or later. The option to start taking Social Security retirement benefits at age 62 is still available, however, this will result in reduced monthly payments. For example, those who opt for early retirement at age 62 will receive a 30% reduction from the full retirement age benefit amount. Those who choose to wait until age 70 will receive $4,194 per month in Social Security benefits in 2022.
Maximum Social Security Tax Limit Will Increase
In 2022, the maximum amount of earnings subject to Social Security tax will increase from $ 142,800 to $147,000. Most workers pay 6.2% of their earnings into the Social Security system each year until they exceed the maximum taxable amount. Those with an income above $147,000 will not have Social Security tax deducted from their salaries and will notice increased paychecks.
The amount of your Social Security benefits will be taxed according to your income level. If your individual income is between $25,000 and $34,000, 50% of your benefits will be taxed. For married couples, this income range becomes $32,000 to $44,000. Naturally, the percentage of Social Security benefits that are taxed will increase as your income increases. Those with higher incomes will have 85% of their Social Security benefits be taxable.
To learn more about your Social Security benefits, you can visit ssa.gov to get an estimate of what to expect in terms of benefits after retirement.