generic Social Security 2022: All the Major Changes That Happened This Year
Social Security was created in the 1930s, and the general principles behind it have remained relatively unchanged ever since. However, the actual details of the program have changed a great deal.
Learn: 6 Shakeups to Social Security Expected in the New Year
Discover: 5 Things You Must Do When Your Savings Reach $50,000
In order to keep the system modernized — and in line with rising costs and incomes — the Social Security Administration announces regular updates to the program every year. The most newsworthy among these is typically the annual cost-of-living adjustment, or COLA, which modifies beneficiary payments based on changes in the inflation rate.
In 2022, the COLA was significant — one of the largest in decades — but the recently announced 2023 COLA was even bigger. Here’s an overview of the major changes that happened to Social Security in 2022, along with a look at those that will spill over into 2023.
Bigger Cost-of-Living Adjustment
As of Jan. 1, 2022, Social Security beneficiaries received one of the most significant cost-of-living adjustments in decades. In fact, the 5.9% increase was the biggest COLA since 1982’s 7.4%. But the bigger news regarding COLAs actually came in October 2022, when the 2023 COLA was announced. On top of the big jump in 2022, the Social Security Administration announced that the COLA starting Jan. 1, 2023, would be a whopping 8.7%. This increase is one of the biggest in history, and the largest since the 11.2% adjustment in 1981.
Take Our Poll: Do You Think You Will Be Able To Retire at Age 65?
Higher Maximum Social Security Benefit
In 2022, just as the COLA rose by a significant amount, so too did the maximum possible Social Security benefit. Specifically, the 2022 maximum benefit rose to $1,657, up from $1,565.
In October 2022, the SSA also announced the maximum Social Security benefit for 2023, which rose by an even greater percentage to $1,827.
Change in Social Security Wage Base
The Social Security wage base is the limit to which earnings are considered taxable for Social Security purposes. Earnings above this level are no longer subject to Social Security taxes. In 2022, the wage base limit increased to $147,000, up from $142,800 in 2021. For 2023, this limit will rise once again, to $160,200.
Increase in Earnings Limit
The so-called “earnings limit” also received a boost in 2022. The earnings limit is the amount that you can earn before the SSA temporarily reduces your benefit. Although you won’t lose these benefits — which will ultimately be paid back to you — while you’re working, your benefits are reduced by $1 for every $2 you earn above the limit. For the year you reach full retirement age only, your benefits are reduced by $1 for every $3 you earn above a separate limit. For 2022, those limits were increased to $19,560 and $51,960, respectively. For 2023, the limits will further jump to $21,240 and $56,520.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Social Security 2022: All the Major Changes That Happened This Year
