The 5 biggest social security changes on the horizon in 2022


In 2022, social security will be different from this year. Every household must be prepared for the changes, as it is not just retirees who could be affected.

So what are the most important changes to know with one of the country’s most popular eligibility programs? Here are five of them.

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1. There is a higher average benefit

In 2021, the average benefits received by retirees were $ 1,565. In 2022, the average benefit will be $ 1,657. Average benefits increase due to a 5.9% cost of living adjustment (COLA) applicable to all social security benefits.

But even after this increase in benefits, the new average benefit will only provide $ 19,884 in annual income. For the vast majority of seniors with near (or below) average incomes, benefits will not be enough to live on.

Seniors should remember that Social Security checks replace only about 40% of income, so they need to be supplemented with another source of funding.

2. There is a higher maximum benefit

The maximum Social Security benefit will also increase next year. The maximum amount a retiree can receive at full retirement age will be $ 3,345 per month, up from $ 3,148 per month in 2020.

A maximum benefit exists because retirement income is based on the average monthly income over a worker’s top 35 earning years – but only income up to a certain threshold matters.

To get the maximum monthly benefit, a retiree would have had to earn the maximum accounting income for at least the 35 years of work included in the Social Security benefit formula.

3. There are new rules for social security taxes

As mentioned above, only income up to a certain threshold is taken into account when calculating social security benefits. This threshold is called the “base salary limit”. The salary base ceiling also caps the amount of income subject to social security tax.

In 2021, for example, the basic salary limit was $ 142,800. Anyone who earned above that amount only paid Social Security taxes on $ 142,800 of income, so anything that earned above was not subject to tax.

In 2022, however, the base salary limit will increase to $ 147,000. So workers with incomes over $ 142,800 will be taxed on more of their money – potentially up to $ 4,200 more.

Workers pay a 6.20% Social Security tax (with their employer covering the other half), so their tax bill for retirement benefits could increase by $ 260.40. Self-employed people who pay the full amount of Social Security tax could end up owing $ 520.80 more.

4. There are new rules for earning work credits

To be entitled to Social Security checks, workers must accumulate 40 “work credits” during their career. The payment of Social Security income taxes is how work credits are earned. A maximum of four credits can be earned each year, and there is a certain amount of money you need to earn to earn each.

In 2021, you could get a work credit by earning $ 1,470. But in 2022, you’ll need to earn $ 1,510 to earn each credit. This means that your income will have to be a little higher next year to be eligible for the work credits which will entitle you to future benefits.

5. The rules for working while receiving benefits are changing

Finally, there are different rules for retirees who wish to work while receiving benefits.

Nothing changes for seniors who have already reached full retirement age, as they can still work as much as they want without impacting their checks. But those younger than FRA and earning a salary are likely to lose some of their benefits if they earn too much. And they will be impacted by the rule change.

In 2021, seniors who do not reach the FRA at any time of the year would start losing $ 1 in benefits for every $ 2 in income over $ 18,960. In 2022, these retirees will be able to earn up to $ 19,560 before they begin to lose their benefits.

Those who reach FRA at some point in the year will be allowed to earn $ 51,960 per year in 2022 before losing $ 1 in Social Security income for every additional $ 3 they earn. This is an increase from $ 50,520 in 2021.

These changes will affect both current and future retirees, so everyone needs to be aware of this to understand what to expect from Social Security in 2022.

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