3 changes to social security you probably did not know
3 changes to social security you probably did not know

3 changes to social security you probably did not know

Because social security has been around for so many years, you can assume that its rules just remain the same. But it is not so.

Social Security may change from year to year, and some changes may be more pronounced than others. Here are a few shifts in social security that may have slipped under your radar so far this year.

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1. The wage ceiling rose

You do not have to charge social security for changes in the program to affect you. If you work and are a higher income, you can now lose more of your income to social security taxes.

Each year, there is a pay cap set for social security tax purposes, and earnings beyond this point are exempt from tax. Last year, the ceiling was set at $ 142,800, but this year it has been increased to $ 147,000. If you earn $ 147,000 or more, that means you pay Social Security tax of an additional $ 4,200 in income.

Meanwhile, the tax rate applicable to social security pay is 12.4%. If you are self-employed, this higher salary cap means your tax liability could increase by nearly $ 521 this year. If you are an employee and therefore share the tax liability with your employer, you look at about $ 260 more in tax.

2. Work credits are harder to earn

To receive Social Security benefits during retirement, you must accumulate 40 work credits in your lifetime. The value of a credit can change from year to year, and you can earn a maximum of four credits a year.

Last year, earnings of $ 1,470 gave you one work credit. This year, it requires a $ 1,510 earnings to get a credit. If you work full time, this change may not affect you. However, if you are a part-time employee, the higher threshold may put you at risk of not getting the credits you need to get benefits.

3. Medicare Part B premiums increased

Technically, Medicare is a separate program from Social Security, and so you can argue that higher Part B premiums do not really constitute a social security change. But seniors who are on Social Security and Medicare at the same time will no doubt be affected by this year’s Part B premium increases. This is because the higher costs will erode their social security increases.

Social security benefits received a 5.9% cost-of-living adjustment (COLA) for 2022 on the heels of violent inflation in the third quarter of 2021. However, a large portion of this COLA will now be lost to higher Medicare Part B premiums, which are deducted from social security benefits for those enrolled in both programs.

Specifically, Medicare Part B rose from $ 148.50 in 2021 to $ 170.10 in 2022. That means seniors expecting a nice pay raise may see it shrink by $ 21.60.

Stay informed

Whether you charge social security or not, changes to the program can have a big impact on your financial image. Keep reading up on Social Security and pay attention when it’s in the news so you do not end up being taken aback.

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