Social Security is an interesting program and its specifics can change from year to year. Whether you think you’ll be claiming benefits in 2022 or not, here are some key figures you need to know.
This is the average monthly benefit that seniors with Social Security will receive in 2022. However, you’ll find that makes for an annual income of just under $20,000 — and shows that planning to live on Social Security alone isn’t a good idea.
While the average monthly benefit changes from year to year, one aspect of Social Security that doesn’t change is that it’s designed to replace about 40% of your pre-retirement income, assuming you’re an average earner. However, most seniors need about twice as much money to maintain a comfortable lifestyle. That’s why it’s important to build your own nest egg for retirement and not rely solely on Social Security.
This is the cost of living (COLA) adjustment that seniors will receive this year. It is also the largest raise the program has received in decades.
But while a 5.9% COLA seems like something worth celebrating, the whole reason for it is that inflation levels have been extraordinarily high. As such, Social Security seniors may not get ahead financially this year, despite a higher raise.
This is the wage ceiling that will apply in 2022. Employees do not pay Social Security taxes on all of their earnings. Rather, there is a limit that changes from year to year.
Last year the wage cap was $142,800, so higher earners will pay more Social Security taxes on their income this year. Those who are employed may share that tax bill with their employers. However, if you’re self-employed, you’ll have to pay that entire bill yourself.
This is the value of a work credit in 2022. Eligibility for Social Security depends on earning enough work credits during your lifetime – specifically 40. The maximum number of work credits you can earn per year is four.
Last year, a work loan was worth $1,470 in income, but this year, employees will have to make more money to get one. This change won’t affect full-time employees, but if you work part-time, you may need to ramp up your hours if you’re concerned about not losing your four work credits this year.
This represents the income-testing limit for 2022. If you are working and receiving Social Security at the same time and you have not yet reached full retirement age (FRA), there is a limit to how much you can earn before you risk having some of your benefits withheld. . (Note that once you reach FRA, you can earn any amount without affecting your benefits.)
If your earnings exceed $19,560 this year and you have not yet joined FRA, you will be withheld $1 in Social Security for every $2 you earn. That money won’t be lost forever — it will be paid out to you later, once you reach FRA.
The limit for the income test is higher if you reach FRA this year. In that case, it’s $51,960. After that point, you have withheld $1 in Social Security for every $3 in income.
Know the right numbers
It’s important to keep up with changes in Social Security, whether you’re applying for benefits or working on it. Keep these numbers in mind so that you are well informed about Social Security and able to make decisions that will help you plan taxes and retirement accordingly.