As per reports from gobankingrates.com, Social Security has been in existence since 1935, yet the program is constantly evolving every year. Due to the annual cost-of-living adjustment, the large increase in payments is one of the greatest headline grabbers for 2022. However, whether you’re already retired, nearing retirement, or just starting your working career, there are a few additional key changes to the program that you should be aware of for 2022. Here’s a quick rundown of what to expect from Social Security in 2022.
Cost-of-Living Adjustment
The amount of Social Security payments will increase by 5.9% in 2022. Supplemental Security Income recipients are subject to the same increase. That increase will be applied to more than 64 million Social Security recipients’ January 2022 checks, as well as the rest of the year. Since the 11.2 % hike in 1981, this will be the highest COLA in 40 years. The disadvantage of any COLA is that it is a reaction to growing inflation, which means that Social Security claimants will incur higher costs due to their higher payouts.
Increase in the Wage Base of Social Security
Existing worker taxes finance the majority of Social Security payouts to retirees. On the other hand, workers are only taxed on a fraction of their earnings, referred to as the Social Security wage base. The Social Security pay base, like the yearly COLA, is subject to annual revisions. The pay base for 2022 is $147,000, up considerably from $142,800 in 2021. This means that workers will only pay a 6.2 percent Old Age, Survivors, and Disability Insurance tax on the first $147,000 of their earnings. For Social Security purposes, earnings exceeding that amount are tax-free.
Amendments to the Full Retirement Age
Any retiree can begin collecting Social Security payments at the age of 62. The full retirement age has varied over time, based on the recipient’s date of birth. Those born in 1960 will be entitled to receive Social Security for the first time when they age 62 in 2022. For those born in 1960 or later, the full retirement age is 67, according to the Social Security Administration. This is a rise from the full retirement age of 66 years and 10 months for those born in 1959 and eligible for Social Security for the first time in 2021.
