Interview by: Heidi Frankel with David Freitag |
fyi50+: We’ve heard in the media the Social Security Administration has announced many new changes to the Social Security program for 2022. I asked Dave Freitag to provide some comments on the details about these changes and how they might impact retirees. Dave, what is going on? Is this good news or bad news?
Dave: It’s a bit of both. The most exciting change for 2022 is the size of the cost-of-living increase. In the past, these increases have been small. For example, in 2021, the increase was just 1.3%. However, in 2022, the benefits increase will be 5.9%. This increase is the largest in almost 40 years and represents a significant change in benefits for 2022.
Someone receiving a $2,599 check each month will see a $2,753 check each month next year. The $154 increase can help pay for higher Medicare Part B and Part D premiums, higher food costs, and higher fuel costs in 2022.
Social Security is one of the very few retirement income sources with cost-of-living increases included automatically. Thankfully, these increases do not require Congress to act: The COLA benefits are part of the existing law. But those workers who are paying the Social Security (OASDI) taxes could be paying more in 2022.
The Social Security wage base will increase from $142,800 to $147,000. That means higher-income workers will pay up to $260 more in tax in 2022 than they paid in 2021. If your income is under $142,800, this increase will not impact your paycheck. For higher-income workers, higher taxes might seem to be bad news.
The good news is the more you pay into the Social Security system each year, the more you get in retirement each month.
Something to stay aware of is the earning test limits. This limit applies to workers who collect benefits before the full retirement age and continue to work. In 2022, you can make up to $19,560 before the earning test reduces your benefits. For every two dollars above the earnings test, one dollar of benefits will be withheld from your check. You don’t lose the withheld benefits; they’ll be repaid when you stop working or reach full retirement age. In the year of full retirement age, the earnings test for 2022 goes up to $51,960.
In your full retirement age year, for every three dollars above the earnings test, one dollar of benefits will be withheld. Once you have reached full retirement age, the earnings test no longer applies.
The www.SSA.gov website is a great place to visit for more details about the changes coming in 2022.
Visit https://www.ssa.gov/news/newsletter/ for more information.