Back in October, the Social Security Administration announced the changes to the Social Security program for 2022. Whether you are receiving Social Security benefits or paying Social Security taxes, it’s important to know how you will be affected in 2022. Continue reading to learn the Social Security changes you need to know.
A 5.9% Increase in Benefits
There will be a 5.9% cost of living adjustment to Social Security benefits, the largest increase since the Reagan Administration. Cost of living adjustments help the benefits keep up with the increase in inflation. For comparison, the cost of living adjustment for 2021 was only 1.3%. The average monthly benefit for 2022 is now $1,657, a $92 increase from 2021.
Full Retirement Age Has Increased
The earliest age that you can claim Social Security is 62. If you choose to claim Social Security this early, you are missing out on your full payout. Under the current law, the full retirement age is going to increase by two months each year until it hits 67. Currently, anyone who was born in 1960 or later will not reach full retirement age until they are 67. At this age, you will start earning your full Social Security benefit amount. However, if you wait until your age 70 you will receive an annual payout up to 32% higher than if you started receiving benefits at your full retirement age.
Increase in Credit Earnings Threshold Went Up
Anyone born in 1929 or later must earn at least 40 credits over their working life to qualify for Social Security benefits. Each year, the amount it takes to earn a single credit increases. The earnings per credit for 2022 is $1,510, an increase of $40 from 2021.
Maximum Taxable Earnings Increased
In 2022, the Social Security tax rate of 6.2% will stay the same while the maximum taxable earnings threshold has increased from $142,800 to $147,000. With the maximum taxable earnings increase, the maximum amount of earnings to calculate retirement has also increased. The new maximum monthly Social Security benefit is $3,345, an increase of $197.
Recipients Earning Limits Increased
If you’re working while also receiving Social Security benefits, you are susceptible to having a portion of your benefits withheld. This fully depends on how much money you earn from your job. Before your full retirement age, you can earn up to $19,560 in 2022 without any Social Security benefits being withheld. After that point, $1 will be deducted for every $2 that you earn. This is a $600 increase in the annual limit from 2021.
If you do reach full retirement age in 2022, you can earn up to $51,960, a $1,440 increase from 2021. For every $3 you earn over the $51,960, your Social Security benefits will be reduced by $1. This will only occur for the months leading up to you reaching full retirement age. After you reach full retirement age, no benefits will be withheld if you continue working.
If you need assistance with your Social Security benefits and making the right decisions for yourself and your financial wellbeing, contact me for more information at (402) 454-7204 or email me at firstname.lastname@example.org.