Although Social Security has been around for years, the program can change from time to time. And prepare for some big changes in 2022. Here’s what you need to know whether you are preparing to take profits soon or in the future.
1. Profit is getting a big boost
The upcoming cost-of-living adjustment, or COLA, for Social Security will be the biggest increase for senior citizens in decades. Benefits are rising 5.9%, and while some of that increase will inevitably be offset by Medicare Part B premium hikes, seniors must still come with a lot more money than they’re used to.
That said, the whole reason for getting such benefits in 2022 is because the cost of living has increased drastically this year. While retirees can expect big paychecks, they will also have to deal with high food costs and other rising expenses.
2. Workers Will Lose More of Their Money to Social Security Taxes
Each year, there is a wage limit that determines how much income employees pay taxes on. The salary range has increased from $142,800 to $147,000 in 2022. Lower-income earners won’t be affected by this change, but if you make more than $142,800, expect a higher tax bill.
3. More Income Required to Earn Work Credits
To be eligible for Social Security in retirement, you need to earn 40 work credits over your lifetime. Work credits are based on income, and you can earn up to four per year.
In 2022, the value of work credits will increase from $1,470 to $1,510. That means it would take $6,040 in earnings to earn four work credits next year. This is not something that will affect full-time workers, but it can impact those who work on a part-time basis.
4. Earning-testing limit increased
The Social Security Administration allows senior citizens to work and collect benefits at the same time. Those who do so after reaching full retirement age (FRA) don’t have to worry about how much they earn. But if you haven’t reached FRA and intend to quit while collecting Social Security, you need to be mindful of earnings-testing limits.
Next year, you can earn up to $19,560 without affecting your benefits. But once your income exceeds that limit, you’ll have Social Security withheld at $1 per income. If you are reaching FRA in 2022, you can earn up to $51,960 without losing any benefits. In addition, you’ll have $3 per $1 in Social Security earnings.
Profits withheld because earnings exceed the test limit do not expire forever. You add them back to your monthly payment once the FRA is reached. But remember, for each month you claim benefits before FRA, those payments are permanently reduced. If you think you’ll earn enough to withhold benefits, you can hold off on filing for Social Security altogether.
keep an eye on social security
Even if you haven’t been planning on signing up for Social Security for some time, changes to the program can have an impact on your finances, such as a higher salary limit or work credit value. It pays to constantly read up on Social Security so that you don’t get caught off guard as the program develops.
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