What will be the increase for Social Security recipients in 2022? – Community News
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What will be the increase for Social Security recipients in 2022?

When you retire, Social Security will likely make up a significant portion of your retirement income. The Social Security Cost of Living (COLA) adjustments are announced annually and help offset your loss of purchasing power due to inflation. The cost of living adjustment for Social Security could be the largest in more than a decade. For the nearly 70 million people receiving Social Security benefits, this could help offset the increased cost of items needed to survive during the coronavirus pandemic.

The Social Security COLA for the following year is generally announced in October and is based on current inflation. Social Security’s COLA was just 1.3% in 2021, but benefits could increase by 4.7% next year. This would be the most significant cost-of-living adjustment from Social Security since 2009, when there was an astonishing 5.8% COLA from Social Security. Before you start planning for your larger Social Security benefit, keep in mind that there are still several months of data that could change the final Social Security COLA for 2022.

In 2021, the average Social Security benefit was just $1,543 per month. For those of you higher on the income scale, the maximum Social Security benefit was $3,148 per month at full retirement age in 2021. As the economy sprints out of the coronavirus recession, inflation is expected to lead to increased Social Security COLA than we’ve seen in quite some time.

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How is Social Security’s COLA determined?

Each year, the Social Security Administration (SSA) bases its cost of living (COLA) increase on the Department of Labor’s Consumer Price Index (CPI) for urban wage earners and white-collar workers. The CPI is intended to be used as a measure of inflation.

Retirees receiving Social Security will continue to feel pressured on their standard of living, even with a higher-than-average rise in the cost of living. Social Security benefits typically don’t keep up with the day-to-day expenses retirees face as they get older. We are talking about living expenses such as rent, food, transportation (including gas), and of course health care and the astronomical amount of money people have to pay for life-saving prescription drugs.

More Social Security Taxes in 2022?

For those of you who are still working and earning an income, you will likely see an increase in income subject to Social Security taxes in 2022 as well. This year, your first $142,800 in earned income will be hit by Social Security payroll taxes for 2021. It’s too early to know if this number will increase again in 2022. President Biden urged adding new Social Security taxes for earned incomes above $400,000. Time will tell whether this will be implemented in 2022 and whether the additional taxes will also translate into potentially larger Social Security benefits for retirees.

There’s never been a better time than today to get on your way to the safe retirement you deserve. As you can see, by trying to live on Social Security alone, most Americans will not maintain their standard of living through retirement.

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Rakesh

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