15 Changes to Social Security in 2022 That You Need to Know

Social Security is a vital part of most Americans' retirement. According to the Social Security Administration (SSA), Social Security benefits, on average, make up about 30% of elderly Americans' income. Social Security changes over time, too. Here's a look at some upcoming changes -- both good and bad. See if any of them surprise you.

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As benefits increase over time due to inflation adjustments, and as average incomes rise, too, the average monthly benefit check for retirees also rises. The SSA offers regular updates on averages, and as of October 2021, the average monthly check was $1,563, up from $1,560 in September.

Each of us has a full retirement age at which we can start collecting the full benefits to which we're entitled based on our earnings history. That age used to be 65 for everyone, in Social Security's early days, but it has been increased over the years. For those who turn 62 (the earliest age at which you can start collecting benefits) in 2021, their full retirement age is 66 and 10 months. Beginning in 2022, those who turn 62 that year or thereafter will have a full retirement age of 67.

Odds are you're taxed for Social Security on all your earnings. But high earners are not. There's a cap above which earnings are not taxed. That cap has been $142,800 in 2021, and it rises to $147,000 in 2022. So someone who earns $1,147,000 in 2022 will only be taxed on the first $147,000 and $1 million of their earnings will go untaxed. Many people see this as unfair, and some have pointed out that eliminating the cap will help strengthen the program, delivering more dollars to its coffers.

ALSO READ: Understanding Taxation of Your Retirement Income

It's surprisingly easy to qualify for Social Security benefits, because you only need to accumulate 40 credits over your working life, and you can earn four per year, or one per quarter. That number 40 isn't changing, but the value of each credit is changing -- from $1,470 in 2021 to $1,510 in 2022. That equates to an annual equivalent of $5,880 in 2021 and $6,040 in 2022. So most people easily qualify after working for 10 years. (Note, though, that their benefits will be rather small if they're earning so little each year.)

Social Security benefits are increased regularly to keep up with inflation, though annual increases tend to be on the modest side, less than what retirees would prefer. In 2021, for example, the cost-of-living adjustment (COLA) was a mere 1.3%. The news is different for 2022, though: The latest COLA increase is a hefty 5.6%. While that's great in many ways, it's still lower than the 6.2% increase per a different and more realistic calculation, the Consumer Price Index for All Urban Consumers (CPI-U). Social Security instead bases COLA adjustments on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which doesn't sufficiently factor in the substantial medical costs many retirees face.

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You might not realize it, but if you start collecting your benefits before your full retirement age, the Social Security Administration will withhold some of your benefits if you earn more than a certain amount. The agency explained it thusly for this year: "If you’re younger than full retirement age during all of 2021, we must deduct $1 from your benefits for each $2 you earn above $18,960. If you reach full retirement age during 2021, we must deduct $1 from your benefits for each $3 you earn above $50,520 until the month you reach full retirement age."

The numbers above change for 2022, from $18,960 to $19,560 and from $50,520 to $51,960.

ALSO READ: How to Avoid Paying Taxes on Your Social Security Benefits

Someone who retired in 2021 at their full retirement age could collect a maximum monthly benefit of $3,011 per month -- which is $36,132 per year. That rises to $3,345 in 2022 -- and equates to $40,140 per year. That's an appealing sum that might make you think you can expect something similar yourself, but remember that this is the maximum. Most folks will collect less, and often a lot less.

The maximum benefit for people retiring in 2022 at their full retirement age is $3,345, but if they're starting to collect their benefits at age 70 beginning in 2022, they can expect more. The maximum monthly benefits for those people in 2022 is $4,194, up from $3,895 in 2021. It's not easy to qualify for this maximum benefit, though.

Social Security issues a report annually on the state of the program, estimating how long its reserves can help it pay beneficiaries the full benefits they're entitled to. Last year's report estimated that the reserves would run dry in 2035. The latest report, though, has moved that up to 2034, in part due to the ongoing pandemic. Before you start hyperventilating, check out the next slide, because the news isn't quite as bad as it seems.

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While Social Security's coffers may run out of reserves that have been tapped in recent years to help pay benefits, beneficiaries will still collect benefits. The latest estimate is that in the first year of depletion, beneficiaries can expect to collect around 78% of their benefits -- down from 79% in the year-earlier report. That's not great, but receiving around three-quarters of your benefits is far better than receiving nothing. Better still, there are multiple ways to strengthen the program, should our representatives in Washington choose to do so.

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Social Security projects that if the reserves run dry, beneficiaries will collect around 78% of their benefits in the first year, and it also projects scenarios out for 75 years. The latest estimate is that after 75 years (if the program isn't strengthened), beneficiaries will collect 74% of the benefits to which they're entitled. That's actually up from the year-earlier estimate of 73%.

Retirees are not the only beneficiaries of Social Security. Disabled workers can also collect benefits, if they qualify. The average monthly benefit for a disabled person was $1,282 in 2021, and it rises to $1,358 in 2022. In annual terms, that's an increase from $15,384 to $16,296.

The 5.9% increase in benefits for 2022 will provide a big boost to married beneficiaries. The average monthly benefit for them, which was $2,599 in 2021, will rise to $2,753 in 2022. That's an increase in annual terms from $31,188 to $33,036.

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In addition to disabled workers, Social Security also makes payments to qualifying survivors of workers who have died. The average monthly benefit for a widowed mother and two children was $3,009 in 2021 and it rises to $3,187 in 2022 -- an increase from $36,108 per year to $38,244. That can go a long way to helping a family in crisis.

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Survivors without children can also benefit from Social Security, if they qualify -- and even divorcees of workers who die may qualify. As of 2021, the average monthly benefit for a widow or widower without children was $1,467 -- or about $17,600 annually. That rises to $1,553, or about $18,600 annually, for 2022.

ALSO READ: Social Security Survivors Benefits -- What You Need to Know

Social Security is always changing, in one way or another, and now and then the changes can be major, such as when the full retirement age was increased from 65 to 67. It's worth keeping up with changes made over the years, so that you can make more informed decisions along the way -- such as deciding when you'll start collecting benefits.

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