The economy is in rapid recovery from the pandemic, which caused a downward spiral in economic output for 2020 and 2021. The pandemic also increased inflation rates to heights our nation has not seen in almost four decades. The cost of living has significantly gone up for the first time since the 2009 recession, and inflation rates are through the roof on everyday items. Along with economic changes, there is also a rapidly aging workforce. With all of these ebbs and flows of life that affect retirement, you can expect to see some significant changes with social security and investments in 2022. Without further ado, here are five changes you can expect to see in the retirement industry in 2022.
Significant Cost of Living Adjustments
COLA, or Cost of Living Adjustments, is adjusted when inflation creates a spike in the cost of housing, food, taxes, and healthcare. The Consumer Price Index measures inflation for Urban Wage Earners and Clerical Workers, and social security payments follow their guidelines. The last significant change to the cost of living adjustments was back in the 2009 recession, at 5.8%. Social security payments will increase by 5.9% in 2022, making it the highest cost of living adjustment in 40 years.
Social Security Payment Increase
You can expect the social security benefit for retirees to raise an average of $92, making it a beneficial average of $1,657. This payment increases even more for spouses who receive benefits, coming in at $2,753. The social security administration will begin posting cost of living adjustment notices on your Social Security account as early as December of 2021, so you can see an exact number on how much you will be earning. Overall, this rise in benefits and income will affect almost 70 million Americans.
Make More, Earn More
In 2022, people receiving social security will generally earn an average of $600 more. The taxable maximum is also increasing due to inflation. In 2022, the tax cap is raising $4,200, making $147,000 the taxable maximum. Social security paychecks will increase if you earn more than $147,000 in 2022 until social security tax is no longer withheld from your salary. Although, in 2022, you can make $19,560 before a benefit dollar is withheld for every $2 earned above the limit. The penalty reduces to $1 withheld for every $3 in excess earnings.
The Retirement Age Rises
The full retirement age is when you can collect retirement benefits. For those born in 1960, the retirement age will now increase to 67. Social security limits increase to $51,960, up to $1,440 from 2021, once in the year of your full retirement age. There is no penalty for working while collecting social security after turning your full retirement age; the extra benefit will be credited and used as flexible income. The maximum payout for those who have reached their full retirement age is $3,345, raising $197 from the previous $3,148. However, if you wait until age 70 to take your benefits, this amount will increase. The new retirement age increases in two-month increments, starting with those born in 1955 and those born in 1960.
Statements Have Better Readability
The new social security statements will be easier to read and include more information than previously given. You can receive social security information via my Social Security website or paper mail. Although, we suggest the online version because these statements are beneficial for the convenience of seeing previous benefits and keeping track of earnings. You can view earnings history, taxes paid, Medicare eligibility, as well as disability and survivor’s benefits. Overall, a less complicated way of viewing these documents will benefit those who find their finances overwhelming or confusing.
Tips for a Better Payout
Having extra disposable income means an opportunity to invest and get a better return on those investments. An increase in payout also means better benefits and coverage for veterans and those on disability. For a general boost in social security payout, work at least 35 years, and work until your full retirement age. Also, if you can, deny your claims until you are 70, claim your independents, and claim your spouse. Lastly, don’t earn too much in retirement to minimize your social security taxes.
These adjustments are also a step towards a better tomorrow, providing for families affected by the pandemic. With all of these changes, it is easy to become overwhelmed with the statistics and numbers. These many changes could affect your choices regarding investing in your retirement account, so if you need a helping hand or extra information, the Retirement Industry Trust Association is here to assist you. Be among the first to know, and stay involved in your retirement plan with RITA.