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Some Big Changes Coming to Social Security in 2022

Every October, the Social Security Administration announces changes for the upcoming year and 2022 is no different as a number of important changes are set to take effect in less than a month, on January 1, 2022.

Social Security first being signed into law.

"Since being signed into law in the mid-1930s, Social Security has been the financial foundation for our retired workers," said certified elder law attorney RJ Connelly III. "Those who wrote the legislation also made the act dynamic, allowing for changes as the economy grew and changed. This is important especially when our economy is facing an inflationary period." That being said, let's take a look at some big changes coming to social security for 2022.


1. 5.9% Cost of Living Increase (COLA) for Beneficiaries

This is perhaps the biggest news coming out of the Social Security Administration for 2022. The 5.9% COLA is the biggest increase in nearly 40 years. Last year's increase was a very modest 1.3%. This means the average benefit for a retired worker will increase by $92 in this upcoming year, from $1565 to $1657. But before there is a massive celebration, COLA's are not designed to provide beneficiaries with additional financial security.


"Unfortunately, this increase is a double-edged sword," stated Attorney Connelly. "It is not designed to help seniors get ahead, rather stay on par with the increases in inflation. With rising fuel costs, increases in the price of food and utilities most, if not all, of this increase will be offset by higher prices."

"Unfortunately, this increase is a double-edge sword...it is not designed to help seniors get ahead, rather to stay on par with the increase in inflation. With rising fuel costs, increases in the price of food and utilities most, if not all, of this increase will be offset by higher prices." ---RJ Connelly III

2. Maximum Taxable Earnings Rise to $147,000

Most of us are familiar with the taxes that are taken out of our checks each payroll period, but many are not aware that there is a cap on taxable income and, for each dollar you pay in income tax and social security, your employer is required to match that payment. Last year, employees were required to pay a 6.2% social security tax on their income up to $142,800. However, in 2022, that cap will increase to $147,000.


"These figures are not arbitrary," pointed out Attorney Connelly. "They are based on the year-over-year increase in the National Average Wage Index (NAWI). The increase in the taxable earnings gap is commensurate with the percentage increase in the NAWI."


3. Full Retirement Age Rises For the Final Time

In 1983, a major overhaul of the Social Security program was done and signed into law. This law included a staged increase in full retirement age, which is where a person becomes eligible to collect 100% of their monthly retirement benefit as determined by their birth year. Under the current law, if you turned 62 in 2021, then your full retirement age is 66 years and 10 months. Unless the law changes, anyone born in 1960 or later will not reach full retirement age until they are 67.4.


"If you claim benefits before your full retirement age, your monthly payments will be lower and in some cases, substantially," said Attorney Connelly. "And retiring early also results in spousal and retirement benefits being reduced as well."

Connelly Law Offices, Ltd. Retirement Age Chart
Changes in full retirement age in 2022

4. Earning Limits for Recipients Will Increase

"Most people who have retired early or those on disability are aware that they can earn some extra money to supplement their benefits but that they can also lose some of their social security income if they go over the threshold," stated Attorney Connelly. "The good news is, in 2022, one of the changes allows retirees to earn a bit more money without their social security checks being negatively impacted."


As Attorney Connelly said, that is indeed a piece of good news for 2022. Those who retire before the full retirement age will be able to earn up to $19,560 in 2022. Additional income after that point will result in a $1 loss of social security benefits for every $2 that exceeds the limit. That number represents a $600 increase over 2021.


If you have reached full retirement age in 2022, you will be able to earn $51,960 annually, an increase of $1,440 from 2021. Additional income after that point will result in a $1 loss of social security benefits for every $3 over the income limit.


5. Maximum Monthly Payouts Increase

"As pointed out earlier, the amount of income subject to Social Security payroll taxes will rise to $147,000 next year," Attorney Connelly said. "But with this increase also comes an increase in the maximum monthly benefit, which increases by $197 in 2022 to $3,345."

"...the amount of income subject to Social Security payroll taxes will rise to $147,000 next year...with this increase also comes an increase in the maximum monthly benefit, which increases by $197 in 2022 to $3,345." ---RJ Connelly III

Again, this is a hefty monthly benefit, but earning it is not easy. The Social Security Administration has three criteria attached to earning this huge payout.

  1. An earner must wait until full retirement age to claim benefits.

  2. An earner must have worked for at least 35 years as every year less those 35 years results in $0 averaged into their monthly benefit.

  3. And for those 35 years, the earner must have hit or surpassed the maximum earnings cap that the Social Security Administration uses to calculate the monthly benefit.

6. Disability Earnings Threshold Rises

Although most Social Security recipients are retired workers or immediate family members of retired workers, another 8 million earners are receiving disability insurance benefits on a monthly basis. "Social Security Disability Insurance (SSDI) supports individuals who are disabled and have a qualifying work history, either through their own employment or a family member and have paid into the system," stated Attorney Connelly. "Qualifying for SSDI requires the individual to have a qualifying illness and must have worked 40 quarters, 20 of which were earned in the last 10 years ending with the year you become disabled. For example, for this year, 2021, you will earn one credit for each $1,470 in wages or self-employment income. When you've earned $5,880, you've earned your four credits for the year. But there will be a change in this for 2022."


In 2021, those on disability were allowed to earn up to $1,310 above their disability benefit payment. In 2022, they will be allowed to earn $1,350 monthly or an extra $480 annually.


Note: There is often confusion between SSI and SSDI. Supplemental Security Insurance (SSI), is a program funded by the Treasury Department and administered by the Social Security Administration using treasury funds, not social security tax monies.


7. Credit Earning Threshold Rises

If you were born in 1929, you were required to earn at least 40 credits over your working life to qualify for Social security benefits. Each credit equaled $1,470 in wages or income from self-employment. But in 2022, there will be a minor change in that.


"Beginning next year, the definition of a work credit for Social Security will rise from $1,470 per credit to $1,510 per credit," explained Attorney Connelly. "And the number of credits needed for disability will depend upon the age when you become disabled."


So 2022 is right around the corner and these changes in Social Security are almost here. "If your already collecting Social Security or you are expecting to file soon, it's important that you be aware of these changes," said Attorney Connelly. "You can probably bank on the fact that either you or someone you know will be impacted by these updates, so it pays to have this knowledge."

Social Security Changes Chart 2022