Social Security is an integral part of the American economic system, and it continues to change year over year. As 2021 comes to an end, we want to provide you with a clear understanding of what to expect in 2022. Whether you plan to receive social security income, or if you pay social security income, knowing the changes can help you be prepared.
Social Security is a government-run program that assists Americans who are disabled, retired, or have lost a spouse or parent. To support social security recipients, people in the employment pay taxes based on their earnings. In other words, you pay taxes while working to help people in need so that when you become eligible, you can receive the same benefits.
Changes to Social Security Taxes
Currently, the only change in 2022 for Social Security taxes affects workers above the wage base limit. In 2021, the wage base limit was $142,800, meaning that anyone earning more than the limit will not have additional taxes. The wage base limit will increase in 2022 to $147,000, and people who met the previous threshold will now have to pay additional income tax.
Social Security tax percentages vary based on your employment status. If you work for someone else, you pay a 6.2% tax rate, and your employer also pays a 6.2% tax rate. However, if you are self-employed, your tax rate is 12.4%.
Changes to Social Security Retirement Age
Every year more people begin retirement, and a sizable portion of retiree’s income comes from Social Security. The minimum age requirement to be eligible for some benefits is 62 years old, however, you do not receive full Social Security benefits until you reach the full retirement age which is increasing from 65 years old to 67 years old in 2022 if you are born in 1960 and later.
Changes to Social Security Benefits
Almost every year, beneficiaries of Social Security income receive an increase that is referred to as the Cost-of-Living Adjustment (COLA). In 2022, the COLA will increase 5.9% percent, which is significantly higher than the 2021 adjustment of 1.3%. The 2022 increase is larger than prior years because there are fewer workers relative to the growing number of Social Security beneficiaries. In addition, the adjustment is likely due to increased inflation and economic impacts from the COVID-19 pandemic.
Another change in 2022 Social Security is regarding the amount of money retirees can earn while also receiving Social Security benefits. The earnings limit for those who have not reached the full retirement age increased from $18,960 to $19,560. Moreover, the limit for those who will have reached the full retirement age in 2022 has increased from $50,520 to $51,960.
Waters Hardy is Here for You
Waters Hardy’s team of tax experts is ready to walk you through the proposals of these changes to your Social Security. Our professionals can give you with all the knowledge you need to comprehend your social security concerns. Contact us today.