One of the positive by-products of today’s rising inflation is that the Social Security Administration has noticed and made adjustments to counter it. And as a result, some important changes are on their way to a Social Security statement near you next year.
Here, we will look at five big changes to Social Security that you need to have on your radar.
1. A living adjustment cost of 5.9%
As the headliner of big changes happening next year, the SSA has announced that beneficiaries will get a 5.9% raise in their monthly benefit checks beginning in 2022. This increase was designed to help retirees manage their buying power amid increasing prices in today’s economy. Even though you will receive more, your ability to buy services and goods really has not changed much from last year — but it is still something to appreciate.
2. The increase of the Social Security wage base
The SSA collects the premiums for its Survivor, Old Age, and Disability Insurance programs by taxing 6.2% of the wage base, up to a certain amount. This year, the number was $142,800, and next year, it will increase to $147,000. In effect, all incomes up to $147,000 will have a taxation rate of 6.2%, while income earned above that threshold will not be subject to a Social Security tax. However, more of your salary will be taxed, and it’s important that you know why.
3. Full retirement age (FRA) is going up to 67 for people turning 62 in 2022
The age at which you will be able to claim full retirement benefits is going up to 67 next year; this applies to anyone that was born in 1960 or after. This means if you were to turn 62 next year, you will be facing a full retirement at the age of 67, which is just months more than individuals born between the age of 1955 and 1959. While it is not a big difference to the retiree if we are only talking about several months of time, but it does have a financial impact when it’s applied throughout the retiree population.
4. You can earn more during retirement without losing your early benefits
If you have not reached full retirement age by next year, you’ll be able to collect up to $19,560 per year without having any reduction in SS benefits.
If you are going to reach full retirement age sometime next year, your salary can go up to $51,960 during the period in 2022 prior to reaching full retirement age without seeing a reduction in your Social Security checks.
If you wait until you reach full retirement age to collect benefits, the SSA won’t ever take benefits away based on work.
5. Monthly premiums of Medicare Part B will rise 14.5%
While it is a different program completely, the SSA’s Medicare program will also have cost increases of its own in 2022. Monthly premiums of Medicare’s Part B plan, stand to rise 14.5% next year, going from $148.50 to $170.10.
This is mostly because of higher utilization across the healthcare spectrum, coupled with cost increases. Critically, this is Medicare’s largest increase in its history and is most certainly a reflection of the world we live in.
Author: Steven Sinclaire