You might assume that because Social Security has been around for so long, its rules will remain unchanged. In fact, that’s not the case at all.
An annual adjustment to benefits is possible, and some adjustments are more obvious than others. There have been several changes to Social Security this year that you may not have noticed.
1. The Wage Cap Increased
Changes to the Social Security program affect everyone, not just those who are collecting benefits. The amount of money you pay in Social Security taxes may have increased if you’re employed and earning more than the average worker.
Wages up to a certain amount are not subject to Social Security taxation, but earnings above that amount are. This year’s cap is now $147,000, up from $142,800 last year. Social Security taxes are levied on an additional $4,200 of income if you earn $147,000 or more.
In the meantime, 12.4% of wages are subject to Social Security taxation. You could face a tax increase of nearly $521 if you’re self-employed this year because of the higher wage cap. It will cost you an additional $260 in taxes if you’re a salaried employee and therefore share the tax burden with your employer.
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2. Work Credits Are Harder to Earn
There are 40 work credits needed to qualify for Social Security benefits in retirement. Only four credits can be earned per year, and the value of credit varies from year to year.
A single work credit was earned last year for $1,470 in earnings. It now costs $1,510 in earnings to qualify for a credit. If you’re employed full-time, you won’t be affected by this change. A part-time worker, on the other hand, maybe at risk of missing out on future benefits if they fail to meet the higher threshold.
3. Medicare Part B Premiums Rose
Because Medicare is a separate program from Social Security, arguing that higher Part B premiums don’t really affect Social Security is a valid point of contention. However, this year’s Part B premium hikes will undoubtedly affect seniors who are both on Social Security and Medicare. This is because their Social Security benefits will be reduced as a result of the increased costs.
After a spike in inflation in 2021’s third quarter, Social Security benefits received a 5.9 percent cost-of-living adjustment (COLA) for 2022. Social Security recipients who are enrolled in both Medicare and Social Security will lose a significant portion of their COLA due to higher Medicare Part B premiums.
It went from $148.50 in 2021 to $170.10 in 2022 for Medicare Part B, which is an increase of $1.50 per month. As a result, retirees who were looking forward to a nice pay increase may see it drop by $21.60.
Changes to the Social Security program could have a significant impact on your financial situation, regardless of whether you currently collect Social Security. Make sure you’re up to date on the latest developments in Social Security by keeping an eye on the news and reading articles about it.
Also Read: How to Obtain a Letter of Award from Social Security?
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