Social Security has been around for a long time. Some of the changes may not hit your attention, despite the fact that the program is constantly changing. It's important to understand how the program is evolving, whether you're close to retirement or years away from it. There are three changes to Social Security that you should be aware of.
1. The average monthly benefit is increasing.
For years, seniors on Social Security have had little in the way of boosted income from one year to the next because of the small cost-of-living adjustments. Next year, the average monthly benefit is going to be $1,657.
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The reason? During the third quarter of the year, the Consumer Price Index rose substantially. The Social Security COLAs will be boosted by 5.9% in 2022, using that data.
Living costs have risen even as the average monthly benefit has risen. Since Medicare Part B premiums are also climbing, seniors on Social Security may not end up gaining much buying power.
2. Social Security taxes are going up.
Social Security taxes can be paid on all of a person's earnings. The wage cap is set each year to determine how much income workers pay taxes.
Workers pay Social Security taxes on their first $150,000 of earnings. Earnings aren't subject to that tax from there.
The wage cap is going to go up to 147,000. Workers with an income of more than 147,000 will be liable for an additional 520.80 in Social Security taxes.
The extra tax will be split evenly between the workers. The self-employed will have to pay it in full.
3. Work credits are harder to earn.
Social Security benefits are not given out automatically. You need to earn 40 work credits in your lifetime to be eligible for them.
The value of a single work credit can change over time. One credit is worth over a thousand dollars of earnings. You will need to earn $1,510 in order to get that work credit.
If you work full-time, the changing value of a work credit won't matter to you since you can't earn more than four work credits per year. If you work part-time, you should pay attention to this shift and make sure you stay on track when it comes to getting benefits down the line.
Don't be in the dark.
Sometimes, keeping up with Social Security changes means having to do a little digging, because they don't always make the front page of the paper. If you stay apprised of those changes, you will be in a better position to manage your income and make the most of your benefits once they are collected.
