As 2021 comes to a close, we actively embrace the New Year. With 2022 comes change, which can be scary, especially when it involves our benefits. We are already aware of some of the Social Security change set to take place in 2022. Luckily, most of the changes are positive, but nevertheless it is critical to stay prepared for any kind of change.
The Change We See Coming
The biggest 2022 Social Security change is the COLA increase. This change is relatively easy to understand. A COLA, or cost-of-living-adjustment, are used to determine increases in Social Security based off inflation. The SSA announced that the 2022 COLA will result in a 5.9 percent increase in benefits, the highest benefit increase in almost 40 years. This is a win-lose situation, as it means higher benefits for seniors, but also high inflation and more expenses.
More Change in 2022
As reported by Sam Swenson for the Motley Fool, there are additional Social Security changes coming in the New Year.
In 2022, the retirement age will increase to 67 for everyone turning 62. This isn’t a drastic difference from the 65-retirement age; however, it can have considerable financial impact to those that seek to retire before the age of 67. Retiring before full retirement age lowers your benefits.
Another, more positive Social Security change is seniors’ new ability to earn more in retirement without their income affecting their early benefits. Earning an income can lower benefits, but with this change your income ceiling is raised. Your benefits will never be reduced if you wait to claim until full retirement age.
Additionally, an interesting change is the increase in the Social Security wage base. This is a potential strategy to help Social Security avoid insolvency in the next decade. The current workforce is the driving source of funding for Social Security. The wages they make are taxed to a certain limit, and those taxes are invested in the Social Security Trust. In 2022, that taxable limit increases, which means more funding for the trust, and a larger pool of high earners to pay into Social Security.
Finally, Medicare Part B premiums increases by 14.5 percent in 2022. Healthcare costs are increasing, mostly because people are using their healthcare. This is the largest cost increase in recent history. Seniors are used to paying for healthcare, but that doesn’t make the expense any easier to pay.
To summarize, retirement is expensive, and change is neither good nor bad. Social Security rarely sees change so it’s unprecedented to see so much change at once. Staying in the loop about the changes to Social Security will help you prepare for the New Year and, more importantly, retirement in general.