Social Security Update with Mary Beth Franklin

Pluses and minuses of Social Security’s cost-of-living adjustment

Social Security’s 5.9% cost-of-living adjustment for 2022 is the biggest hike in 40 years for those receiving benefits, Mary Beth Franklin says, but it also raises the limit on wages subject to FICA taxes to $147,000 next year, up from $142,800.

November 11, 2021
By InvestmentNews

Mary BethFranklin Hi, everyone, I’m Mary Beth Franklin with the latest news in Social Security, and boy, do I have good news for retirees and everyone else of the 70 million Social Security beneficiaries? You’re getting a big raise next year, 5.9 percent. That’s the biggest increase in cost of living adjustments in 40 years. Now there’s also a downside to this. While beneficiaries will be getting bigger monthly checks, people who continue to work and pay FICA taxes that fund those Social Security benefits will also be paying more in taxes. We pay FICA taxes on our wages up to 140 two thousand eight hundred dollars this year in 2021. Next year that increases to one hundred and forty seven thousand dollars. That means if you make one hundred and forty two thousand eight hundred or more next year, you’re going to be paying more taxes. It’s also good news for retirees who claim benefits early and who continue to work. They will basically be able to earn more money next year in 2022 before they sacrifice any Social Security benefits. But keep in mind, any benefits you may lose to the earnings test are not gone forever. They are restored at your full retirement age in the form a bigger monthly benefits going forward. And one final point, one adviser said to me, Hey, this huge five point nine percent increase next year, should I tell my clients to go ahead and file for benefits now so they don’t miss out? Absolutely not. Anyone who is 62 or older next year in 2022 will get the benefit of that five point nine percent cost of living adjustment in the future when they eventually claim their benefits. Because the way the Social Security law works is any time you are eligible for Social Security starting at age 62. Up until the time you actually claim benefits, you get every single cost of living adjustment that is applied from the time you were 62 until the time you claim. So, for all those retirees and near retirees, enjoy your raise.