Social Security Gets Massive 5.9% Raise in 2022
The largest cost-of-living-adjustment since 1982 impacts 90% of seniors
On October 13th, the Social Security Administration announced that Social Security and Supplemental Security Income benefits for tens of millions of Americans will increase in 2022. The press release stated the following:
“Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 5.9 percent in 2022.
The 5.9 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022. Increased payments to approximately 8 million SSI beneficiaries will begin on December 30, 2021. (Note: some people receive both Social Security and SSI benefits).
The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $147,000.”
Biggest Leap Since 1982
This 5.9% leap in the annual COLA is the largest since 1982. According to the Social Security Administration, retirees will see an average of $92 added to their monthly benefits next year, raising the typical amount to $1,657.
Further, almost 9 out of every 10 people over the age of 65 receive Social Security and collectively, the social security payments make up about a third of their income (although that number is much higher for lower income seniors).
Keeping Pace with Inflation?
Of course there were many factors that went into making this COLA decision. The latest press release from the Bureau of Labor Statistics in September reported that the Consumer Price Index for All Urban Consumers increased 0.3% in August after rising 0.5% in July. And over the last 12 months the All Items index increased 5.3%.
When to File for Social Security
Social Security benefits constitute a big part of many retirement plans. Advice abounds about how and when you need to file. What is best for you and your family?
Generally, you can file for your Social Security retirement benefits when you reach age 62. But doing so will reduce your benefits by as much as 30% below what you might receive if you wait until Full Retirement Age (FRA). Accordingly, many times it is beneficial to delay filing to better maximize your lifetime benefits.
If you wait until your Full Retirement Age (FRA) – which is 66 or 67 for most people depending on your date of birth – you will get your “full benefit.” Moreover, you can wait until age 70, which will increase your benefit because you earn what is called “delayed retirement benefits.” This ends up equating to an annual increase of approximately 8% in benefits for every year you wait until claiming at 70. There is no benefit to waiting after age 70 to claim Social Security benefits.
Social Security is Only Part of Retirement
It is important to remember that although Social Security plays a very important role in supplementing one’s retirement income, it should not be one’s only source of income.
In fact, even the Social Security Administration states that Social Security benefits will – at best – cover about 40% of the typical worker’s pre-retirement income. It is meant to be a safety net to help pay for essential expenses.
Planning for the Future
Social Security is certainly a great piece of the total retirement income picture, but is not the only part. Here at Joel Isaacson & Co., we use cash flow modeling and conservative growth assumptions to help prepare our clients for their eventual retirement.
More than that, we believe retirement should be the culmination of a life of hard work and dedication, therefore financial independence in retirement is a key goal for many of our clients.
So, whether you are in your 30’s and putting money away in your 401(k) or in your 60’s and preparing for retirement (and claiming Social Security benefits), we are committed to helping you achieve your short and long-term financial goals no matter what lies ahead.