As more and more baby boomers enter into retirement, Social Security benefits may contribute to a considerable portion of their retirement income. To properly plan for the future, many baby boomers need to know what changes are in the pipeline for Social Security in 2022. Here are the main 5 changes to understand:
1. The Social Security Trust Fund Continues to Be Depleted: Unless Congress invokes some significant changes, the current state of the Social Security Trust Fund will be depleted by 2033. If Congress allows this to happen, only 80% of promised benefits will be paid out. This may sound like a non-issue, but for many American retirees a 20% reduction in benefits could push them below the poverty line.
2. The 2022 Cost of Living Adjustment (COLA): Due to rising inflation, the Social Security Administration announced the largest COLA in 40 years to take effect in 2022. Retirees will see a 5.9% increase. The flip side of this equation however, is that inflation has caused many items routinely purchased by retirees to increase in cost. The COLA is determined by inflationary rates.
3. Full Retirement Age for Social Security Increases: The full retirement age for Social Security benefits has increased to age 67. Many entering retirement still qualify to start taking payments at age 62, at a reduced amount. Before initiating your Social Security payments, it is wise to complete a comprehensive retirement plan that analyzes your situation to determine the best time to start drawing Social Security benefits. The analysis can help you maximize your benefits over the long-term.
4. Maximum Benefit Caps Increase: For retirees who earned $147,000 or more, the maximum benefit amount allowed will be slightly higher. The increased amount allowed will be $3,345 per month starting in 2022. Waiting until age 70 to start receiving benefits increases the cap even further to $4194 per month.
5. Higher Income Taxes: Social Security benefits are taxable and the percentage of tax varies by income level and amount received. An individual with total income between $25,000 and $34,000 50% of the Social Security income received is taxable. For those with higher incomes, as much as 85% of benefits may be taxable.
For more information on how Social Security changes in 2022 will impact your retirement and estate planning goals, set up a consultation with the estate planning attorneys at Stouffer Legal in the Greater Baltimore area. You can schedule an appointment by calling us at (443) 470-3599, emailing us at office@stoufferlegal.com, or register for an upcoming free webinar using the link below:
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