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4 Social Security Changes to Prepare for in 2022

By Christy Bieber – Dec 10, 2021 at 6:30AM

Key Points

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Are you ready for these big changes coming down the pipeline?

Social Security has a number of complex rules that determine the benefits seniors receive and the amount workers pay in taxes. These rules don't just stay the same from year to year either.

In fact, both retirees and current employees need to know about four big Social Security changes coming in 2022 that could affect the amount of money they end up bringing home. Here's what they are. 

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Image source: Getty Images.

1. Full retirement age is moving later

Social Security's benefits formula has set a "full retirement age" or FRA. That's when seniors must claim their benefits in order to receive their primary insurance amount (PIA). PIA is the standard benefit retirees are entitled to based on their earnings record over a 35-year career. 

Full retirement age used to be 65. However, Social Security was amended in 1984 to gradually move it later. For anyone born in 1943 or after, FRA is at least 66. FRA was set at exactly 66 for those born between 1943 and 1954, but began gradually moving back for people born after that. For anyone turning 66 in 2021, FRA was 66 and 2 months. But for those who won't celebrate their 66th birthday until 2022, FRA is going to be 66 and four months. 

The fact FRA is moving back two months next year for people first reaching their 66th birthday means retirees should be prepared to wait a little longer to start receiving their benefit checks to avoid getting hit with early filing penalties. It also means seniors reaching FRA next year won't be able to earn as many delayed retirement credits as those who already reached this milestone. 

2. Retirees are getting a 5.9% raise

One of the biggest changes retirees will experience next year is a big increase in their monthly checks. That's occurring because Social Security recipients are entitled to a 5.9% Cost of Living Adjustment (COLAs) in 2022.

COLAs happen in most years, but haven't been very impressive recently because of low inflation. That all changed for 2022 because a variety of factors -- including rapidly rising demand, labor shortages, and supply chain issues -- have resulted in inflation levels near record highs. Retirees are going to end up getting their largest benefit bump in close to four decades, and the average senior will see about $92 extra per month in their checks. 

Although this may sound like good news, seniors should know that even the big COLA may not help them maintain buying power because prices may rise even more rapidly

3. The wage base limit is increasing 

Social Security changes in 2022 won't just affect current beneficiaries. Future retirees who are still in the working world may be affected by new rules as well. Specifically, some of the country's highest earning Americans will be subject to a larger Social Security tax bill. 

That's not because Congress is taking action to raise Social Security taxes on the rich -- although it's possible legislation could pass that would make that happen. Instead, higher earners will see their taxes go up because the wage base limit is increasing.

The wage base limit is the maximum income subject to Social Security tax. Any earnings above that limit aren't taxed (and don't count in the average wage formula that determines how much money seniors receive). In 2021, the wage base limit was $142,800, but it's rising to $147,000 in 2022. Those who earn more than $142,800 will end up paying Social Security taxes on up to $4,200 more income. 

4. Seniors can earn more before forfeiting benefits

Finally, retirees who are working while getting benefits may be able to earn more before they forfeit some of their Social Security income. Although this forfeiture is temporary and retirees eventually get back the extra money, the loss of Social Security checks can be painful for those who were counting on multiple income sources.

See, anyone who hasn't yet reached full retirement age could risk losing some of their Social Security checks if they earn too much.

Seniors who won't hit FRA at any point during the year lose $1 for every $2 in earnings above $18,960 in 2021, but they won't start losing these benefits until their earnings reach $19,560 in 2022. And those who will hit FRA at some point during the year would lose $1 for every $3 in benefits once their earnings reached $50,520 in 2021, but won't begin forfeiting benefits in 2022 until their earnings hit $51,960. This is good news for people who want to double dip and get both Social Security checks and a paycheck. 

Ultimately, understanding changing Social Security rules is important for everyone, so both retirees and people still in the workforce should be mindful of these big changes coming in 2022. 

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