The only certainties in life are death, taxes… and changes to the Social Security code. What’s changing now? Quite a bit, actually.
- The full-retirement age will reach 67 in 2022. That’s up from 66 and 8 months in 2020 and 66 and 10 months in 2021. (If you don’t collect until 70, however, your benefits increase even more.)
- Benefits also increased in 2021, but not by much. A 1.3% boost translates to about $20 from $1,523 to $1,543. This increase compares with 1.6% in 2020 and 2.8% in 2019.
- The threshold for Social Security tax has been increased from $137,700 to $142,800, a number that was based on the average wage increase. (The Social Security tax rate, however, remains the same —6.2% on employees and 12.4% on the self-employed.)
The earnings test also increased to $18,960, up from $18,240 in 2020. This means that if your income exceeds a certain amount, you won’t be entitled to receive 100% of your benefits. (Once you reach full retirement age, the benefits that were withheld are added back.)
Proposed benefit increases: President Biden hopes to expand benefits, as well as who can receive them.
First, the president is advocating to increase the minimum Social Security benefits to 125% of the federal poverty level. He’d also like to increase the amount of checks for those who have received retirement benefits for at least 20 years, eliminate penalties for teachers, and allow teachers to earn Social Security sooner.
He’d also like to change the scale that determines benefit amounts from the CPI-W, the index that currently determines the cost-of-living adjustments for Social Security benefits, to the CPI-E. Whereas the CPI-W tracks households with at least half of their household income coming from clerical or wage-paying jobs, the CPI-E is based on spending for adults 62 and older and more carefully considers health care costs.
Proposed eligibility expansion: President Biden wants to prorate benefits for those who have only worked 10 years as well as make caregiving count. Under Biden’s plan, caregivers of children under 12 or family members with disabilities would be eligible to receive Social Security credits with earnings equal to the average monthly wage.
These proposed changes have yet to make it through Congress, however, so stay tuned.
