(As seen on WZZM TV 13) In 2021, Americans experienced the highest spike in inflation in three decades, as measured by the Consumer Price Index. According to the U.S. Bureau of Labor Statistics, the all-items inflation index rose 6.8% for the 12 months ending in November 2021, demonstrating the largest 12-month increase since the period ending in June 1982.
Noting these drastic inflation changes and in preparation for what 2022 would bring, the Social Security Administration issued a cost-of-living adjustment (COLA) in October that will impact more than 70 million Americans. Social Security and Supplemental Security Income (SSI) benefits will increase by 5.9% beginning in January 2022, with benefits payable to more than 64 million Social Security beneficiaries. Additionally, approximately 8 million SSI beneficiaries will see increased payments beginning on Dec. 30, 2021, to accommodate the sharp inflation increase.
Additional changes include an increased limit on taxed wages in 2022, an increased earnings limit for workers who are younger than “full” retirement age, as well as the first extension to full retirement age since changes were last enacted in 1983.
Lisa Hojnacki, participant services coordinator/team lead for Greenleaf Trust’s retirement plan services division, said the monthly increase for SSI benefits are due to near-term inflation as a result of the pandemic.
“As costs have gone up, Social Security benefits are also increasing, (and) retirees are expected to see about $92 extra per month (compared to 2021). So that’s a big increase, but the reality is, the cost of inflation of commodities and also Medicare Part B premiums will likely eat up a lot of that increase in benefits,” she said.
While Social Security beneficiaries initially might be excited about the increase, Hojnacki suggests caution, noting the cost of goods and services including insurance premiums also are on the rise for seniors or those in retirement age.
“So, while their monthly benefits are going up from Social Security, their insurance premiums are also increasing. In addition to health care insurance premiums increasing, so are regular goods, commodities like meat, gas and home heating, … fruits and vegetables and things like that. Those increased benefits are likely to not necessarily lead to a more comfortable lifestyle for seniors, just to probably maintain the lifestyle that they have.”
Hojnacki said changes to Social Security benefits for the coming year are significant and abnormal, noting a combination of the pandemic and the growing wealth gap in the U.S. as primary drivers.
According to a Social Security news release, other annual adjustments that take effect each January are based on average wage increases. Because of the 2021 increase, the maximum amount of earnings subject to the Social Security tax, or taxable maximum, will increase from $142,800 to $147,000.
“So that means that those earning higher income will pay Social Security taxes on $4,200 more of income than they did in 2021,” she said.
The Social Security Administration also will increase the earnings limit for workers who are younger than “full” retirement age from $18,960 to $19,560, with a deduction of $1 from benefits for each $2 earned over $19,560. Full retirement age is between 66 and 67, based on the year a person was born.
Similarly, the earnings limit for those reaching full retirement age in 2022 also will increase from $50,520 to $51,960, as the SSA will deduct $1 from benefits for each $3 earned over $51,960 until the month the worker reaches full retirement age. For those workers who are full retirement age or older for the entire year, there is no limit on earnings.
Hojnacki said the fourth major change on the administration side of Social Security includes a move to “full retirement age,” the first move of its kind in nearly four decades.
According to ssa.gov, the normal retirement age (NRA) is the age at which retirement benefits (before rounding) are equal to the “primary insurance amount,” or PIA. The website explains PIA as the benefit a person would receive if they elect to begin receiving retirement benefits at their normal retirement age, at which point the benefit is neither reduced for early retirement nor increased for delayed retirement. Specific, individual retirement age can be calculated on SSA’s website.
“Full retirement age is moving and it’s being extended, so full retirement age will be going up, that’s something for folks to keep an eye on. And right now, for most Americans, it’s age 66 and it’s moving back a little bit so that for those turning 66 in 2022, their full retirement age is being pushed back by two months, potentially, just depending on when that falls for them.”
Hojnacki said the full retirement age up until 2022 was 66 and two months, with the age being pushed back to 66 and four months in the coming year and ultimately delaying benefits for some incoming beneficiaries by a few months.
“Again, something to just keep an eye on as far as when you can start receiving that full benefit,” she said.
Beyond 2022, legislators have begun to explore avenues to address the predicted depletion of Social Security benefits by 2038 through the recent proposal of House Bill 5723.
“There’s a lot being proposed in this bill that would affect Social Security and also is an attempt to reduce the wage gap,” she said.
As beneficiaries seek to navigate the changes coming in 2022, Hojnacki suggests making use of the Social Security Administration’s set of online resources.
“The Social Security Administration has really great online tools. So, making sure that you create your online profile and pay attention to what they’re offering with their online tools, because that will give people the best, most informed, personal benefit experience that they can have.”
Additional information is available at ssa.gov.