Insights

3 Changes to Social Security You Probably Didn’t Know

Many seniors look to Social Security as an essential, stable source of monthly income. But while Social Security has been around for many decades, the program tends to undergo changes on a yearly basis — some of which may not be so obvious. Here are a few ways Social Security has evolved since the start of 2022.

1. Benefits went up substantially

Seniors on Social Security don’t get stuck with the exact same monthly benefit for the rest of their lives. If that were to happen, they’d struggle financially due to the natural pull of inflation.

That’s why Social Security benefits are subject to an annual cost-of-living adjustment, or COLA, the purpose of which is to help ensure that they keep up with inflation. Because inflation soared during the latter part of 2021, Social Security benefits got a 5.9% COLA at the start of 2022 — the most generous one in decades.

Image source: Getty Images.

Next year’s Social Security COLA won’t be announced until October, because it will be calculated based on third-quarter inflation. But since inflation has been rampant this year, seniors are no doubt anticipating an even larger raise for 2023.

2. Seniors lost buying power despite a generous raise

Social Security recipients may have seen their benefits go up 5.9% this year. But the rate of inflation has well outpaced that raise, leaving seniors to lose buying power.

In June, the Consumer Price Index, which measures changes in the cost of goods, rose 9.1% on an annual basis. When we compare that increase to the raise seniors got at the start of the year, that 5.9% boost looks far from impressive.

3. Workers got charged more taxes for Social Security purposes

Social Security gets the bulk of its funding from payroll taxes. But higher earners don’t necessarily pay Social Security taxes on all of their earnings.

Each year, there’s a wage cap established for Social Security tax purposes. In 2021, it was $142,800, but in 2022, it rose to $147,000. That means higher earners are paying Social Security tax on an additional $4,200 of income this year. And chances are, they’ll face an even higher Social Security tax burden next year.

That’s not automatically a terrible thing. The reality is that Social Security needs as much payroll tax revenue as it can get to stay afloat. Some lawmakers have even proposed lifting the wage cap altogether so that workers pay Social Security tax on their entire earnings.

While that change is just a proposal and by no means imminent, it puts a modest wage cap increase in a much better light. After all, paying Social Security tax on another $4,000 or $5,000 of earnings is better than paying it on another $100,000 or more.

Keep tabs on Social Security changes

Whether you’re currently collecting benefits or have many years in the workforce ahead of you, it’s important to stay apprised of Social Security changes. Being informed could help you not only claim benefits strategically, but better plan for your own retirement.

The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Rebate Rewards

Level 2 Rebate

Deposit $2,000 and get $200 Rebate
$ 200 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $2,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $200 Rebate
Popular

Level 1 Rebate

Deposit $1,000 and get $100 Rebate
$ 100 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $1,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $100 Rebate

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here To Get Started
EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here For More Info