Social Security has been around for a long time. The program still undergoes changes. Workers and seniors can expect some big ones this year.
1. A raise for some people.
At the end of 2021, the average monthly Social Security benefit was $1,565. It will rise to $1,657 in 2022. The largest cost-of-living adjustment in decades is to thank.
You may have noticed that inflation was high during the second part of the year. Social Security recipients will get a 5.9% raise in 2022, thanks to the rising cost of consumer goods. The average monthly benefit will increase by $92.
The image is from the same source.
Not so fast. Medicare Part B premiums are following the average benefit increase. Medicare Part A is free for most people. Part B is a cost.
Seniors who enroll in Medicare and Social Security pay their Part B premiums. Seniors on Medicare won't see the full impact of this year's COLA because Part B is increasing by $21.60 a month in 2022,
2. A higher earnings-test limit.
Seniors on Social Security are allowed to work. Those who do so at or beyond full retirement age don't have to worry about how much they make. The annual earnings-test limit is for those who work and claim benefits before the FRA.
Seniors can earn up to $18,960 a year without having their Social Security benefits impacted. The threshold increased to $19,560 in 2022. Social Security income could be taken away if earnings go past that point.
The limits for earnings test are different for those who reach FRA in 2022. Seniors in that boat could make up to $50,520 last year without affecting their benefits. The threshold this year is more than $50,000.
3. Higher payroll taxes.
The majority of Social Security's revenue comes from payroll taxes. Since there's a wage cap that comes into play every year, higher earner don't pay taxes on all of their earnings.
Social Security didn't tax earnings above 142,800 in 2011. The wage cap has gone up to 147,000, meaning that workers earning that much money, or more, are liable for taxes on an additional $4,200 in income.
The change won't affect the average worker. Those earning higher salaries are likely to be unhappy about paying more in payroll tax. Self-employed people don't get to split their Social Security tax burden with their employers.
Stay informed.
Social Security will undergo some changes this year. It's important to read the program so you know what to expect when you sign up for benefits.
