5 Ways the Social Security System Will Change in 2022

Social Security recipients likely already know that their benefits get a bump almost every year to counteract the effect of inflation. But that cost-of-living adjustment is just one of several annual tweaks to the Social Security system.

These annual increases affect people who are already retired as well as people who have yet to retire.

Following is a look at what will increase for 2022.

1. Benefits

Social Security recipients will see their monthly payments rise by 5.9%, as we reported in “Social Security Bump for 2022 Is the Largest in Decades.” That cost-of-living adjustment, or COLA, translates to an extra $92 a month, based on the average Social Security retirement payment.

Many retirees won’t see that much extra Social Security income in 2022, however. It likely will be offset in part by higher Medicare premiums and deductibles, although the federal government has yet to announce exactly what those Medicare costs will be for 2022. In fact, the Medicare Part B premium is withheld from some retirees’ Social Security payments.

For some folks, the extra income may also be offset by higher taxes, as we detail in “Why the Social Security Bump Will Cost Some Retirees in 2022.”

2. The earnings limit for working retirees

If you claim Social Security retirement benefits before reaching your full retirement age and also continue working, the Social Security Administration will withhold some of your benefits if your income exceeds what’s known as the earnings limit. (There is no penalty for earnings made while working after you reach full retirement age.)

This earnings limit generally increases annually as the national average wage index increases. For 2022, it will rise:

• From $18,960 to $19,560 if you will reach full retirement age after 2022
• From $50,520 to $51,960 if you will reach full retirement age in 2022

The Social Security Administration notes, however, that you do not lose any benefits that are withheld due to your income exceeding the applicable earnings limit. Once you reach your full retirement age, your monthly benefit is increased permanently to account for months in which benefits were withheld.

3. The tax cap on workers’ income

Here’s another annual adjustment based on the increase in average wages: The maximum amount of a worker’s income that is subject to Social Security payroll taxes will rise from $142,800 in 2021 to $147,000 in 2022.

So, if you’re fortunate enough to earn more than $147,000 in 2022, you won’t owe Social Security payroll taxes on every dollar you earn.

The Social Security payroll tax rate itself will remain the same in 2022: 6.2% for employees (employers pay another 6.2% on their employees’ behalf) and 12.4% for the self-employed.

4. The earnings required for one credit

Not everyone is eligible for retirement benefits. As we explain in “6 Groups Who Cannot Rely on Social Security Benefits“:

“To receive Social Security retirement benefits, most people need to accumulate at least 40 ‘credits’ during their working lifetime, according to the U.S. Social Security Administration (SSA). Currently, you can earn up to four credits per year if you work and pay Social Security taxes.”

The earnings required for you to receive one Social Security credit, also known as one-quarter of coverage, will rise from $1,470 in 2021 to $1,510 in 2022.

5. The maximum benefit

There is a limit to how much money a retiree can receive in benefits. It’s known as the maximum Social Security benefit.

Your maximum Social Security benefit depends on the age at which you retire. The maximum benefit for someone who retires at their full retirement age will rise from $3,148 per month in 2021 to $3,345 per month in 2022.

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