10 Important Social Security Changes Coming in 2022

Social Security has many rules that change from year to year.

Both current and future retirees are affected by these changes, so everyone needs to know how Social Security will look different in 2022.

Here are 10 important Social Security changes on the horizon that you should be prepared for next year.

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Full retirement age (FRA) is the age when a senior can first start their Social Security checks in order to receive their standard benefit. The standard benefit, or primary insurance amount, is the benefit owed to them based on their work history with no early filing penalties or delayed retirement credits applied.

FRA has been gradually moving later. For those turning 66 in 2022, it will be 66 and four months. That's up from 66 and two months for retirees who turned 66 in 2021. And for anyone turning 62 next year, their future FRA will be 67.

Retirees need to be aware of how FRA is changing so they can make an informed choice about when to start benefits.

ALSO READ: How Much Will Your Social Security Benefit Shrink by Claiming Early?

Social Security is an earned benefit. You must earn work credits to get it.

A maximum of four work credits can be earned annually. And there's an income threshold you must reach to earn each one.

In 2022, earning a single work credit will require you to have earnings of $1,510. That's up from $1,470 in 2021. If you want to max out your work credits, you'd need to make $160 more in 2022 than in 2021, earning a total of $6,040.

Social Security benefits increase in most years because of something called cost-of-living adjustments (COLAs).

COLAs are calculated by comparing price changes using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

In 2022, there will be a 5.9% COLA. This is the largest in four decades, and it means seniors will see a lot more money in their monthly checks.

Social Security taxes are taken out of your earnings. But you only pay Social Security taxes up to the wage base limit.

The wage base limit sets a maximum taxable amount, and no income above it is taxed or counts in determining Social Security benefits. This ensures people who earn millions of dollars annually don't end up with huge Social Security checks.

In 2022, the wage base limit is going up to $147,000 from $142,800. Anyone who earns more than $142,800 will thus end up paying more in Social Security taxes next year.

There's a maximum Social Security benefit that exists because of the wage base limit. In order to earn it, you'd need to earn the maximum taxable income for 35 years and claim Social Security benefits at 70. Most people don't do that.

But, for those who do, the maximum benefit will be higher in 2022 than in 2021. It's going up to $4,194 from $3,895 in 2021.

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Seniors who haven't reached full retirement age are at risk of temporarily losing part of their Social Security if they earn too much from work while receiving benefits. But, in 2022, they can earn a little more without running into this problem.

If you don't reach FRA at any point during the year, you can earn up to $19,560 in 2022 without reduced benefits, up from $18,960 in 2021. You'll lose $1 in benefits for every $2 earned above this new limit.

If you'll reach FRA at some time during 2022, you can earn $51,960 before losing $1 in benefits for each $3 in extra earnings. This is up from $50,520 in 2021.

The fact you can earn more without temporarily forfeiting benefits is good news for seniors who want both benefits and a paycheck.

ALSO READ: Good News, Retirees: Earn More Next Year Without Affecting Social Security

Medicare premiums are withdrawn directly from Social Security checks for most retirees. Unfortunately, that means the increase in Medicare premiums in 2022 could leave seniors with less retirement money.

Medicare Part B premiums will be going up 14.5% next year, jumping from $148.50 in 2021 to $170.10 in 2022. This added cost will reduce the extra money seniors get from their cost-of-living adjustment.

Retirement benefits aren't the only kind of Social Security benefits out there. Social Security Disability Insurance (SSDI) is also available to workers with long-term disabling medical conditions.

Those receiving SSDI will get larger benefits next year as well. The average benefit for people receiving Social Security Disability income will go up to $1,358 next year from $1,282 in 2021.

Social Security has a trust fund that it uses to pay benefits. That trust fund is expected to run dry in 2034. When this happens, benefits will only be payable out of current tax revenue being collected. There's not enough revenue to pay the full amount of benefits, and a 22% cut could happen automatically when the trust fund runs dry.

In 2022, Social Security gets one year closer to hitting this milestone. Congress will need to take some type of action to reform Social Security's funding stream sooner rather than later to stave off this big automatic benefits cut.

ALSO READ: Social Security Benefit Cuts Could Happen by 2034, Trustees Say

Social Security benefits become partly taxable once provisional income reaches $25,000 for single tax filers or $32,000 for married joint filers. Provisional income is all taxable and some nontaxable income plus half of Social Security benefits.

The income limits for untaxed benefits don't increase each year, despite wage growth and inflation. As a result, more retirees each year are subject to tax -- and that will again be the case in 2022.

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These Social Security changes will impact every American, young and old. It's crucial you understand the new rules that will apply to Social Security next year and that you know what these changes will mean for your budget.

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