There are certain topics that have been in the news a lot this year -- think inflation and the conflict in the Ukraine. But Social Security hasn't exactly been the top news story of 2022, and understandably so. After all, the program has been around for years, and in the absence of something ground-breaking, it's unlikely to be a big source of internet chatter.
But that doesn't mean Social Security didn't undergo some big changes this year. Rather, those changes may have simply slipped under your radar. Here are a few, however, that are a pretty big deal.
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1. Benefits got their largest boost in decades
Each year, Social Security benefits are subject to a cost-of-living adjustment, or COLA, the amount of which is pegged to inflation. Now many of us think of 2022 as the year when inflation downright exploded. But actually, living costs were already notably on the rise during the latter part of 2021.
As such, to kick off 2022, seniors on Social Security saw their benefits increase 5.9%. And at the time, that raise seemed generous.
Unfortunately, it quickly became obvious that a 5.9% COLA wasn't going to cut it given the way inflation continued to soar. But that's the thing about COLAs -- there are no additional adjustments once those raises are set. So sadly, seniors on Social Security lost buying power this year, even though their benefits got a pretty sizable bump.
2. Higher earners paid more Social Security tax
If you're a lower or moderate earner, you may not have to worry about the Social Security wage cap, which is the maximum amount of income that's subject to Social Security taxes each year. As such, you may not have noticed that in 2022, the wage cap rose from $142,800 to $147,000, leaving higher earners to pay taxes on an additional $4,200 of income.
If you did notice that change, you may not have been happy about it. But it also means that you're earning a pretty nice salary, so that hopefully softened the blow.
3. Work credits got harder to earn
Chances are, you didn't notice that the value of Social Security work credits went up in 2022 because you may not even know what a work credit is. And that's OK. If you're well into your career and have worked full-time for a decade or longer, you probably don't need to concern yourself with work credits.
But for part-time workers, work credits are something to keep tabs on, because you need to earn 40 of them in your lifetime to qualify for Social Security benefits during retirement, and you can only earn up to four credits per year. Meanwhile, in 2022, the value of a single credit rose from $1,470 to $1,510. So if you work on a very part-time basis and don't earn that much, you may not get your four credits this year.
Stay in the know
You might assume that Social Security isn't something you need to keep tabs on often. And the reality is that it doesn't have to be a topic you read about daily.
But should you input the words "Social Security updates" into your favorite search engine once a quarter? That's certainly not a bad idea, even if retirement is many years away and you're nowhere close to being able to start collecting that money.
Clearly, certain Social Security changes actually impact workers more so than retirees, like changes to the wage cap and work credits. And so it's important to stay informed in that regard, whether to plan for extra taxes or make adjustments to your work schedule so you don't miss out on the chance to qualify for benefits down the line.
