Social security administration announcement key figures today that affect workers and retirees a substantial increase in the taxable wage base for workers and the largest increase in benefits for retirees in decades.
First of all the news of the salary base. The maximum amount of income subject to Social Security tax will rise 2.9% to $ 147,000 from $ 142,800 in 2021. That means a bigger tax bill for about 12 million high-income workers. The increase in the wage base reflects any growth in real wages. The maximum Social Security tax per worker will be $ 18,228 or a maximum of $ 9,114 withheld from the 2022 paychecks of highly paid employees. Workers and their employers each pay a social security tax of 6.2%; the self-employed pay both sides of the tax. (The increase in benefits is based on the Consumer Price Index, and a different index measuring wage growth determines annual increases in the wage base.)
For retirees, the key figure is the cost of living adjustment (COLA): more than 64 million beneficiaries will benefit from an increase of 5.9% in 2022, against a COLA of 1.3% in 2021. This means that the average Social Security benefit for a retired worker will increase by $ 92 per month to reach $ 1,657 in 2022, while the average benefit for a retired couple will increase by $ 154 per month to reach $ 2,753. The last time retirees experienced such a large increase was in 2009, when the increase was 5.8%. The previous peak was 7.4% in 1982.
Retirees will need to factor in Medicare Part B and Part D premiums and income-related surcharges, which reduce all of their overall benefits. The Senior Citizens League has found that Medicare Part B premiums are one of the fastest growing retirement costs. Medicare Part B premiums, which are automatically deducted from Social Security checks, often consume most, if not all, of the increase in COLA.
If you’re affiliated with Medicare, you won’t get your exact 2022 Social Security benefit amount until official Medicare premium amounts are announced. You can check in December if you have an online social security account. The Centers for Medicare & Medicaid Services indicate that 7% of Medicare beneficiaries will pay income-related surcharges, which apply to premiums for Part B and D drugs, in 2021. The surcharges have been indexed to inflation for the first time in 2020 (except for income level of $ 500,000 and above), offering some relief. For 2021, they come into effect for people with income of $ 88,000 and couples filing jointly with $ 176,000 of income. The wealthiest senior couples pay more than $ 12,000 a year in Medicare Part B premiums.
The Social Security Administration has also announced the income limit for workers who are younger than the full retirement age (66 for those born between 1943 and 1954). You can find out the age of your full retirement and see by how much your benefit will be reduced if you apply for benefits before the age of full retirement on the Social Security website. Beneficiaries who have not reached full retirement age will receive $ 1 in benefits for every $ 2 of earnings over $ 1,630 per month, or $ 19,560 per year in 2022. A worker who turning 66 years and four months in 2022 (the full retirement age for those born in 1956) can earn up to $ 4,330 per month before his birthday, without losing his benefits. Above this threshold, the worker will lose $ 1 in benefits for every $ 3 earned. Once you reach full retirement age, you can earn as much as you want without losing Social Security benefits at all. A higher COLA is not good news.
The Committee for a Responsible Federal Budget warns that Social Security is already on the path to insolvency and believes that higher cost-of-living payments could deplete programs’ trust funds a year earlier than expected (2032, to place of 2033 according to the Congressional Budget Office).
Here’s a look at the increases in COLA since 2011.
2016: No increase.
Social security administration released this sheet on developments in Social Security 2022.
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