Social Security is an important program to keep tabs on. This applies whether you're collecting benefits, on the cusp of retirement, or many years away from leaving the workforce behind.
Sometimes, when Social Security changes come down the pike, it'll be all over the news. But often, those changes won't be broadly advertised, so it's easy to miss them if you're not looking out for them. With that in mind, here are a few changes to Social Security that happened in 2022.
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1. The average monthly benefit increased
At the end of 2021, the average monthly Social Security benefit came to $1,565. But in 2022, seniors on Social Security got a 5.9% cost-of-living adjustment that brought the average monthly benefit up to $1,657.
That doesn't mean seniors are living it up, though. Because inflation has been rampant, the cost of everything from gas to groceries to utilities is up. In fact, in January, inflation rose 7.5% on an annual basis, which means seniors on Social Security have already fallen behind from a cost-of-living standpoint, despite that generous raise.
2. The wage cap rose
If you're years away from collecting Social Security and are assuming that the program's recent changes are irrelevant to you, think again. Social Security gets the bulk of its revenue from payroll taxes -- the ones we all moan about having taken out of our paychecks.
Each year, there's a wage cap that's established that dictates how much income can be taxed for Social Security purposes. Last year, that cap sat at $142,800, but in 2022, it rose to $147,000.
If you only earn $80,000 a year, this change won't mean anything to you. But if you earn an annual salary of $150,000, you'll be paying Social Security taxes on an additional $4,200 of income this year.
3. The value of work credits went up
Many people assume that once they reach a certain age, they're entitled to income from Social Security. But in order to collect those benefits in retirement, you need to accrue 40 work credits in your lifetime.
Each year, it takes a specific amount of earnings to earn a work credit. Last year, $1,470 of earnings would give you one work credit, and you can accrue a maximum of four per year. This year, the value of a work credit has increased to $1,510.
If you work full-time, this change probably won't matter -- even if you only earn minimum wage. But if you're a part-time worker who's hoping to be eligible for Social Security down the line, it pays to keep tabs on how the value of work credits evolves.
Stay in the know
Some Social Security changes may be more obvious than others, but either way, it's important to know how the program is evolving. Down the line, we could see other changes to the program implemented, so be sure to keep Social Security on your radar -- even if you're not planning to sign up for benefits for quite some time.
