3 Social Security Changes You Probably Didn’t Know About
BBecause Social Security has been around for so many years, you might assume that its rules remain the same. But this is not the case.
Social Security can change from year to year, and some changes may be more obvious than others. Here are a few Social Security changes that may have escaped your radar so far this year.
1. The salary cap has increased
You do not need to be collecting Social Security for program changes to affect you. If you work and have a higher income, you may now be losing more of your income to social security taxes.
Each year, a salary cap is set for Social Security tax purposes, and earnings beyond that point are exempt from tax. Last year, that cap was set at $142,800, but this year it has risen to $147,000. If you earn $147,000 or more, that means you pay Social Security taxes on an additional $4,200.
Meanwhile, the tax rate that applies to wages for social security purposes is 12.4%. If you’re self-employed, that higher salary cap means your tax liability could increase by nearly $521 this year. If you are a salaried worker and therefore share this tax with your employer, you pay about $260 more in taxes.
2. Work credits are harder to earn
To qualify for Social Security benefits during retirement, you must accumulate 40 work credits during your lifetime. The value of a credit can vary from year to year and you can only obtain a maximum of four credits per year.
Last year, $1,470 of earnings qualified you for a work credit. This year, it takes $1,510 in income to get a credit. If you work full-time, this change may not affect you. But if you’re a part-time worker, that higher threshold could put you at risk of not acquiring the credits you need to get benefits later.
3. Medicare Part B premiums have increased
Technically, Medicare is a separate program from Social Security, so you can argue that higher Part B premiums aren’t really a change in Social Security. But seniors who receive both Social Security and Medicare will no doubt be hurt by this year’s Part B premium hikes. This is because these higher costs will erode their Social Security increases.
Social Security benefits got a 5.9% cost-of-living adjustment (COLA) for 2022 on the heels of runaway inflation in the third quarter of 2021. But much of that COLA will now be lost in favor of higher Medicare Part B premiums, which are deducted from Social Security benefits for those enrolled in both programs.
Specifically, Medicare Part B went from $148.50 in 2021 to $170.10 in 2022. That means seniors anticipating a nice increase could see it drop by $21.60.
Whether you collect Social Security or not, changes to the program could have a significant effect on your financial situation. Keep reading about Social Security and pay attention when it makes headlines so you don’t get caught off guard.
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