Each year, Social Security recipients anxiously await the announcement about the cost-of-living adjustment (COLA). The news is good going into 2022, but before we share it, we will provide some broader information about the Social Security program.
Everyone does not automatically qualify for Social Security. It is earned when you pay taxes, and you get one retirement credit for every $1470 that you earn in 2021. The maximum annual accrual is four credits, and you will qualify for Social Security when you have 40 credits.
Of course, you have to wait until you reach the benefit eligibility age. It is 67 for people that were born in 1960 and any later year, and it is 66 for people that were born between 1943 and 1954. If you were born after 1954 but before 1960, your exact eligibility age will vary slightly.
It is 66 years and two months for someone born in 1955, and it is 66 years and four months for a qualified individual that was born in 1956. It goes up by two months per year in this manner until it levels out in 1960.
You can delay the submission of your application for Social Security until you are as old as 70. If you do this, you are awarded retirement credits, and they result in a benefit increase of eight percent for every year that you delay.
There is also an early retirement option. You may submit your application for Social Security when you are as young as 62, but you will receive a reduced benefit. The amount of the reduction will be between 25 percent and 30 percent depending on your birth year.
If you are still working and you decide to collect the early retirement benefit, there is a major negative. There is $18,906 limit on penalty-free earnings. Your benefit is reduced by one dollar for every two dollars that you make that is in excess of this amount.
2022 Social Security COLA
The annual cost of living increases are calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers.
It should be noted that the Biden administration would like to use the Consumer Price Index for the Elderly. Supporters of the change contend that the CPI-E would more accurately reflect the specific costs that seniors incur.
Analysts are projecting a 6.2 percent COLA for Social Security recipients in 2022. The average Social Security benefit this year is $1543, so this would be an increase of about $95 a month for someone receiving the average payout.
Your Social Security benefit amount will be based on the 35 years during which you earned the most money. With this in mind, if you decide to earn delayed retirement credits, you will probably be making more money during those years than you did when you were quite young.
There is a maximum benefit because there is a ceiling on the amount of income that can be taxed for Social Security purposes. In 2021, the maximum benefit at full retirement age is $3011 a month, and the maximum taxable income is $142,800.
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