3 Social Security Changes You Probably Didn’t Know About
SSocial Security is an important program to keep an eye on. This applies whether you are collecting benefits, about to retire, or many years away from leaving the workforce.
Sometimes when Social Security changes are coming pike, it will be all over the news. But often these changes won’t be widely advertised, so it’s easy to miss them if you’re not looking for them. With that in mind, here are some changes to Social Security that happened in 2022.
1. The average monthly benefit has increased
At the end of 2021, the average monthly Social Security benefit was $1,565. But in 2022, seniors on Social Security got a 5.9% cost-of-living adjustment that brought the average monthly benefit to $1,657.
This does not mean, however, that the elderly live well. Because inflation is rampant, the cost of everything from gas to groceries to utilities is rising. In fact, in January, inflation rose 7.5% on an annual basis, which means that senior citizens on Social Security already have fell behind from a cost-of-living perspective, despite this generous increase.
2. The salary cap has increased
If you’re years away from collecting Social Security and assume recent program changes don’t affect you, think again. Social Security derives most of its revenue from payroll taxes — the ones we all regret taking out of our paychecks.
Each year, a salary cap is established that determines the amount of income that can be taxed for social security purposes. Last year, that cap was $142,800, but in 2022 it has risen to $147,000.
If you’re only making $80,000 a year, this change won’t mean anything to you. But if you earn an annual salary of $150,000, you’ll pay social security taxes on an additional $4,200 that year.
3. The value of work credits has increased
Many people assume that once they reach a certain age, they are entitled to income from Social Security. But to receive these benefits in retirement, you must accumulate 40 credits of work during your life.
Each year, it takes a certain amount of income to obtain a work credit. Last year, $1,470 in earnings would give you one work credit, and you can rack up a maximum of four per year. This year, the value of a work credit has increased to $1,510.
If you work full time, this change probably won’t matter, even if you only earn minimum wage. But if you’re a part-time worker hoping to qualify for Social Security down the line, it pays to keep an eye on the changing value of work credits.
Stay in the know
Some Social Security changes may be more obvious than others, but either way, it’s important to know how the program is changing. Ultimately, we may see more changes to the program implemented, so be sure to keep Social Security on your radar — even if you don’t plan to sign up for benefits for a while.
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