As we enter 2022, there are some changes to Social Security and Medicare to be aware of, as well as some predictions for the future.
Here are some of the most significant changes that Social Security filers will face in 2022 and beyond:
- If you currently receive Social Security payments, your monthly Social Security payout will rise by 5.9% due to the COLA. The increase in Part B rates will somewhat offset this great boost.
- In 2022, you’ll need to earn $6,040 or $1,510 every quarter to receive the maximum of four credits.
- $147,000 is the maximum taxable pay basis.
- When you reach the age of 62 in 2022, you will be able to retire at the full retirement age of 67.
- If you claim benefits after turning 62 in 2022, your monthly income will be cut by 30% of your full retirement age amount.
- The yearly earnings maximum is $19,560 if you choose to work before reaching full retirement age and are collecting benefits. In 2022, when you reach full retirement age, the barrier will be $51,960. This restriction vanishes once you reach full retirement age!
- For the year 2022, the maximum Windfall Elimination Provision (WEP) deduction is $512.
- If you’re applying for Social Security in 2022, keep in mind that if you have an HSA, you may need to do some extra planning.
Create your own “my Social Security account” at ssa.gov if you haven’t already. This allows you to go back over your earnings history and predict your expected future benefit. The predicted benefit becomes more accurate as you get closer to retirement. If you do not do so before reaching the age of 60, you will get an annual benefit statement in the mail.
The following are some of the most significant changes to Medicare in 2022:
- The cost of Medicare Part B will increase by $21.60 to $170.10.
- In 2022, the yearly deductible for all Medicare Part B participants will be $233, up to $30 from the previous year’s cost of $203.
Because Social Security contains certain social components, the higher your income, the more your Medicare premiums will be. The IRMAA stands for “Income-Related Monthly Adjustment Amount.” The IRMAA adjustment, which is computed every year, impacts Medicare Parts B and D and is based on income from two years ago’s tax returns.
The adjustment for 2022 is based on your 2020 tax return. When IRMAA takes effect in 2022, the barrier will be $91,000 for single people and $182,000 for married couples. It’s based on a Medicare-specific metric called “Modified Adjusted Gross Income.” If you’ve had a “life-changing event,” as defined by the Social Security Administration, you can appeal the IRMAA adjustment.
THE PROSPECTIVE FUTURE
We’ve all heard the rumors regarding Social Security’s future sustainability. Social Security is not going bankrupt. By law, Social Security can only pay out what it collects and/or what it already has on hand. The reserves that have accumulated over many years as a result of more individuals paying than receiving Social Security benefits are now being used to pay current payouts. By 2033-2034, the reserve will be exhausted.
In the absence of improvements, the present legislation mandates a 24 percent reduction in benefits for everyone. Social Security’s troubles are exacerbated by the aging of the Baby Boomer generation, rising life expectancy, and fewer individuals paying into the system. The majority of commentators believe Congress will enact the required measures. We’ve all heard for a long time that Congress has to pass these measures as quickly as possible.
Given that Social Security is the federal government’s largest mandated expenditure program, you’d expect that this change would be given more weight. The more this rhetoric continues, the more doubtful I get. For me, I want to take a 24 percent reduction. If Congress resolves the issues, it will be frosting on the cake, and I will not be dissatisfied.
Aside from the necessary modifications to ensure the future viability of Social Security, there has recently been greater discussion about altering or removing the Windfall Elimination Provision (WEP). This isn’t a new endeavor; it’s simply gaining traction at the moment.
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This article focuses on the developments that will occur in 2022. While the majority of individuals file at the age of 62, the latest filing date is at the age of 70, you have an 8-year window to file for Social Security payments. Longer life expectancy typically equates to a longer retirement period. There are advantages and disadvantages to filing early or late.
There are no hard and fast guidelines for determining the optimum claim approach. You only get one chance to make the best option for you and your partner (if you have one). In most cases, Social Security payments replace around 40% of your pre-retirement income. Make your filing date based on logic, not emotion.
The WEP, or Government Pension Offset, may affect you if your cash flow is excellent and you have a spouse (GPO). If your health is good and you want to work until you reach full retirement age, talk to an expert about several claiming tactics to consider. You might be shocked to learn that the optimum plan for you can boost your overall lifetime benefits by up to $200,000.