On October 13, 2021, The Social Security Administration (SSA) announced a 5.9 percent benefit increase for 2022. The annual increase is known as the Social Security Cost of Living Adjustment (COLA). Given the benefit increase, now may be a good time for us to look at your overall financial picture to determine the impact of the change on your situation.
In general, there will be an increase in Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million individuals. For Social Security beneficiaries the increase will be effective January 2022.
The 2022 Social Security Changes COLA Fact Sheet has a plethora of information that may be applicable to more than current Social Security beneficiaries. For example, the Fact Sheet indicates that:
- The maximum taxable earnings subject to Social Security (OASDI only) will increase from $142,800 (2021) to $147,000 (2022).
- The Medicare (HI) tax has no taxable earnings limit.
While the COLA is the largest in 39 years, it should be noted that the increase is a function of higher inflation over the past 12 months. While the increase in Social Security benefits is welcome news for Social Security beneficiaries, it comes at a time when the cost of living for many individuals has increased more than the amount of the COLA. In addition, the Social Security benefit increase does not reflect any increases in the cost of Medicare premiums that should be announced before the end of the calendar year.
Finally, with respect to the SSA announcement, it is imperative that you and your financial professionals consider the overall impact to your financial plan and projections. For many, the benefit increase can provide additional disposable income. However, given the inflationary pressures on other expenses you may have less disposable income even after the benefit increase.
I hope this information is helpful. If you would like to discuss any of these issues, please do not hesitate to call.
Lincoln Financial Network is the marketing name for the retail and financial planning affiliates of Lincoln Financial Group and includes Lincoln Financial Securities Corporation and Lincoln Financial Advisors Corp., broker-dealers, registered investment advisors and members of FINRA and SIPC. Insurance offered through Lincoln affiliates and other fine companies. Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Lincoln Financial Network and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.
The citation for the Social Security Administration information is: