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2022 outlook for Social Security

Share this…FacebookPinterestTwitterLinkedin There’s good and unhealthy information on the horizon for Social Security in 2022. First, the excellent news: Subsequent…

By Staff , in Medicare , at December 16, 2021



There’s good and unhealthy information on the horizon for Social Security in 2022.

First, the excellent news: Subsequent yr, advantages will enhance by 5.9%, the most important annual cost-of-living enhance in 40 years.

And individuals who flip 62 in 2022 — which means they’re newly eligible for Social Security — have two issues to cheer about. The 5.9% COLA might be factored into their future advantages even when they don’t declare advantages till later. And people newly eligible beneficiaries, who have been born in 1960, can anticipate a rise of their future advantages primarily based on a rise within the newest common wage index fairly than the beforehand forecast decline.

Social Security advantages are primarily based on an advanced formulation that adjusts a employee’s high 35 years of profession earnings to adjustments within the common wage index up by age 60. Such indexing ensures {that a} employee’s future advantages mirror the overall rise in the usual of dwelling that occurred throughout his or her working life.

For individuals who flip 62 in 2022, the Social Security Administration makes use of 2020 — the yr they turned 60 — because the indexing yr. The nationwide common wage index enhance 2.83% in 2020 over the earlier yr.

However again within the early days of the COVID pandemic, when tens of millions of individuals have been all of a sudden unemployed, it appeared as if the common wage index for 2020 would decline for under the second time since 1951.

A share change within the common wage index within the yr a employee turns 60 has an almost one-on-one affect on the Social Security profit formulation. At one level, it appeared as if the longer term advantages for these born in 1960 might have dropped between 10% and 15% from these of individuals born one yr earlier. However the drop by no means materialized. Disaster averted.

Now for the unhealthy information.

A lot of the 5.9% annual enhance in Social Security advantages might be offset by larger Medicare premiums, that are often deducted immediately from month-to-month advantages. Month-to-month premiums for Medicare Half B, which covers medical doctors’ charges and outpatient providers, will enhance to $170.10 in 2022, up 14.5% from the 2021 premium of $148.50 per thirty days.

Larger-income retirees topic to income-related month-to-month adjustment quantities or IRMAAs can pay much more, starting from an additional $68 to an additional $408.20 per thirty days per individual. Medicare Half D prescription drug premiums are additionally topic to separate month-to-month high-income surcharges.

Lastly, the long-term monetary outlook for the Social Security reserves continues to deteriorate, in accordance with the most recent trustees’ report, with the mixed Social Security Outdated Age, Incapacity and Survivors belief funds anticipated to be depleted by 2034 — one yr sooner than beforehand forecast.

(Questions on Social Security guidelines? Discover the solutions in Mary Beth Franklin’s 2021 book at MaximizingSocialSecurityBenefits.com.)

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