3 Social Security Rules That Are Changing in 2022 — and 2 That Aren’t

In 2022, some important things about Social Security are changing. These shifts in the rules are going to affect both current retirees and people who plan to claim benefits in the future.

However, there are also some Social Security regulations that are staying the same. And the fact that some of these rules aren’t changing could end up costing retirees.

Here’s what you need to know about what’s happening with Social Security next year.

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3 Social Security rules that are changing in 2022

Here are three big Social Security changes that will occur in 2022.

1. FRA is changing

One of the biggest changes to Social Security that those nearing retirement need to know about is a change in full retirement age (FRA). FRA is the age when you can get your standard benefit.

For anyone who turned 66 in 2021, FRA was 66 years and 2 months. But for anyone who won’t celebrate their 66th birthday until 2022, FRA will be 66 and 4 months — two full months later. That means many older Americans will have to wait longer to claim benefits next year if they want to avoid losing some of their monthly income due to an early claim.

FRA isn’t just moving later for people turning 66 next year. It’s going to be later for everyone who didn’t reach age 66 by the end of 2021. That’s because Social Security amendments passed in 1983 gradually shifted FRA back from 65 to as late as 67 for people born in 1960 or after.

This is one of the biggest changes people need to know about so they can make plans for when to get their first benefit check.

2. Work credit rules are changing

Work credits are the key to becoming eligible for Social Security.

Up to four work credits can be earned every year, and seniors must have a minimum of 40 to get benefits on their own career history (rather than, say, claiming spousal or survivor benefits).

To earn a work credit in 2021, workers needed to earn $1,470. They could max out their work credits for the year by making at least $5,880. But work credits are getting more expensive in 2022. The minimum earnings for each one is $1,510. That means unless your earnings are $6,040 or greater for the year, you won’t earn the maximum four credits next year to help you qualify for future Social Security benefits.

3. Retirees are getting a raise

The rules regarding FRA and work credits mostly impact future beneficiaries. But current Social Security recipients will also face a big shift in 2022.

Benefits will increase by 5.9% next year. This pay bump will occur because beneficiaries are entitled to the largest cost of living adjustment (COLA) in four decades.

COLAs are designed to help benefits keep pace with inflation in order to ensure rising prices don’t diminish the buying power seniors have. Since inflation is surging, Social Security checks are going up quite a bit. Unfortunately, some evidence suggests even this large raise won’t be big enough. Seniors should still watch their budget carefully to avoid overspending, despite this positive change.

2 Social Security rules that are sticking with the status quo

Here are two rules that will stay the same.

1. The thresholds at which benefits become taxable will remain the same

Some seniors pay taxes on their Social Security benefits. In fact, up to 85% of benefits can be taxed on the federal level.

Retirees end up losing part of their benefit check to the IRS once their provisional income reaches $25,000 for single tax filers or $32,000 for married tax filers. Provisional income isn’t all income — it’s all taxable income, half of Social Security benefit income, and some non-taxable income.

These income thresholds haven’t changed since the federal government first began taxing benefits. And the fact they aren’t indexed to inflation, so don’t go up over time, means a growing number of retirees end up paying federal taxes on benefits each year.

As COLAs increase benefits and inflation causes prices to rise and necessitates seniors withdraw more from savings over time, many more people each year end up with an income that’s high enough to entitle the federal government to a cut of their checks. With inflation so high and the COLA so large, this could be an especially big issue in 2022 if many seniors increase their provisional income substantially since the rules on when benefits are taxed won’t be changing.

2. So will the rules for early filing penalties and delayed retirement credits

When Social Security was created, a formula was put in place to try to equalize the amount of money retirees received regardless of when exactly they claimed benefits between the ages of 62 and 70.

Those who file for benefits at FRA get their standard benefit. Retirees who claim ahead of it face early filing penalties. Those who claim after it earn delayed retirement credits.

Despite the fact life expectancies have changed since Social Security was created, and despite the fact FRA has changed, the amounts of the early filing penalties and delayed retirement credits remain the same:

Early filing penalties reduce benefits by five-ninths of 1% per month for each of the first 36 months benefits are claimed before FRA.
Early filing penalties reduce benefits by five-twelfths of 1% per month for any prior month benefits are claimed if retirees are more than 36 months early.
Delayed retirement credits that apply after FRA increase benefits by two-thirds of 1% per month.

Retirees should know how these penalties and credits work when they decide if it’s a good time to claim benefits.

In fact, both current and future Social Security beneficiaries need to know all of these rules — including both the ones that are changing and the ones that will remain the same. Understanding them can help them make informed choices about an important retirement income source.

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