SSocial Security has a number of complex rules that determine the benefits elderly people receive and the amount of taxes paid by workers. These rules don’t stay the same from year to year either.
In fact, retirees and current employees must know about four big social security changes coming in 2022 that could affect the amount of money they end up bringing home. Here is what they are.
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1. The full retirement age rises later
social security the benefit formula has set a “full retirement age” or FRA. This is when the elderly must claim their benefits in order to receive their Primary Insurance Amount (GARF). ARP is the standard benefit to which retirees are entitled based on their income over a 35-year career.
Full retirement age was 65 years old. However, Social Security was changed in 1984 to gradually shift it later. For anyone born in 1943 or later, FRA is at least 66. FRA has been set at exactly 66 for people born between 1943 and 1954, but began to decline gradually for people born afterwards. For anyone turning 66 in 2021, FRA was 66 and 2 months. But for those who won’t celebrate their 66th birthday before 2022, FRA will be 66 years and four months old.
The fact that FRA sets back two months next year for people who first reach their 66th birthday means retirees should be prepared to wait a little longer to start receiving their benefit checks in order to avoid to be touched by penalties for early declaration. It also means that the seniors who reach FRA next year will not be able to earn as much. deferred retirement credits like those who have already reached this milestone.
2. Retirees get a 5.9% increase
One of the biggest changes retirees will experience next year is a big increase in their monthly checks. This happens because social security beneficiaries are entitled to a 5.9% cost of living adjustment (COLA) in 2022.
COLAs happen most years, but haven’t been very impressive lately due to the low inflation. That all changed for 2022, as a variety of factors including rapidly increasing demand, labor shortages and supply chain issues resulted in inflation levels nearing record highs. Retirees will eventually get their biggest benefit in almost four decades, and the average senior will see about $ 92 more per month on their checks.
While this may sound like good news, older people should know that even the big COLA may not help them maintain their purchasing power, as prices can increase even faster.
3. The basic salary limit increases
Social security changes in 2022 will not only affect current beneficiaries. Future retirees who are still in the working world may also be affected by the new rules. Specifically, some of the highest paid Americans in the country will be subject to a larger Social Security tax bill.
Just Not Because Congress Is Taking Action To Raise Social Security Taxes On The Rich – Even If It Is Possible legislation could pass that would make that happen. Instead, higher incomes will see their taxes increase because the limit on the wage base increases.
The salary base ceiling is the maximum income subject to social security tax. Any income above this limit is not taxed (and does not count in the average wage formula that determines how much money seniors receive). In 2021, the basic salary limit was $ 142,800, but it rises to $ 147,000 in 2022. Those who earn more than $ 142,800 will end up paying Social Security taxes up to $ 4,200 more.
4. Seniors can earn more before they lose their benefits
Finally, retirees who work while receiving benefits may be able to earn more before losing some of their social security income. While this confiscation is temporary and retirees eventually get the extra money back, the loss of Social Security checks can be painful for those who relied on multiple sources of income.
You see, anyone who has not yet reached full retirement age could risk losing some of their Social Security checks if they earn too much.
Seniors who will not reach the FRA at any time of the year lose $ 1 for every $ 2 of earnings over $ 18,960 in 2021, but they will not start losing those benefits until their earnings reach 19,560 $ in 2022. And those who reach the FRA at some point during the year would lose $ 1 for every $ 3 in benefits once their incomes reach $ 50,520 in 2021, but would not start losing their benefits. benefits in 2022 only when their income reaches $ 51,960. This is good news for people who want to double the bill and get both Social Security checks and a paycheck.
In the end, understand change social security rules is important for everyone, so retirees and those still in the workforce should be aware of these big changes coming in 2022.
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