- Every year, the rules for Social Security might change.
- Some of those changes may be minor, but that does not rule out the possibility that they may have an impact on you.
It’s hard to think that we’ve already reached the first month of 2022. We are, however, in the middle of a new year, which means that Social Security has already experienced some significant adjustments.
Some of these changes may be immediately noticeable. If you are already receiving benefits, you may have noticed that your January paycheck was much larger than the amount you got in December.
That’s because Social Security will get a 5.9 percent cost-of-living adjustment in 2022, resulting in larger benefits for seniors to enjoy in the future.
Even though a much greater payout is difficult to detect, several Social Security adjustments took effect this year that you may not have been familiar with. Here are a few that you should be aware of.
The salary cap increased.
The vast majority of Social Security’s funding comes from payroll taxes. However, you may not be required to pay taxes on all of your earnings.
Social Security establishes a salary ceiling every year, governing how much income is taxed to support the program. In 2021, the maximum was set at $142,800, implying that earnings over that amount were not subject to Social Security taxation for that year.
However, the pay ceiling has been raised to $147,000 for this year. The fact that a higher pay ceiling exists may go unnoticed by those who do not earn a six-figure income. You may not even be aware of it or worry about it if you do not make a six-figure salary.
However, if your earnings are high enough to be influenced by the new wage ceiling, you need to take a look at your most recent cheque to find out. Increasing Social Security taxes may contribute to lower take-home income than you had anticipated.
The profits test limit was raised.
Seniors receiving Social Security benefits are permitted to work and earn money. While working and collecting Social Security benefits before reaching full retirement age, you run the danger of having part of your wages withheld from your Social Security payments if your earnings surpass a specified level.
According to the Social Security Administration’s earnings-testing limit, it was $18,960 in 2021 for individuals who did not achieve a full retirement period at some time during the year. This year, the maximum amount is $19,560.
To be clear, raising the earnings-test limit is a positive development. It allows seniors the freedom to earn more money from a job without preceding their Social Security benefits.
For individuals reaching full retirement age this year, the earnings-test cap is $51,960, the same as last year. It is an increase over the previous year’s total of $50,520.
The importance of work credits increased.
It is not true that every older citizen is eligible for Social Security benefits. To be eligible for benefits in retirement, you must have accrued a total of 40 work credits during your working life.
The monetary worth of a labor credit might fluctuate with time. In the previous year, one credit was worth $1,470 in profits. This year, employees must earn $1,510 to qualify for a credit.
Working full-time means that you will not be affected by this little adjustment at all — even if you only earn the bare minimum salary. It is because you may only accumulate four work credits each year.
On the other hand, part-time employees should be aware of this change and consider increasing their working hours if they are worried about not having enough work credits to be eligible for Social Security benefits shortly.
Ongoing changes are occurring in Social Security, and some of these changes may be more subtle than others. If you are completely unaware of any of these developments, you may want to spend a bit more time becoming more knowledgeable about Social Security benefits.
Even if retirement is still several years away, remaining up to date on the program’s operations might be beneficial. Furthermore, please maintain track of any changes, such as a higher pay ceiling, that may have an immediate effect on you.