The Social Security Administration is issuing the largest bump in benefits to retirees in 40 years, while increasing the taxable wage base for workers by nearly 3 percent in order to keep up with rising inflation under President Biden.
To account for the inflation from the third quarter of 2020 through the third quarter of this year, the SSA on Wednesday revealed the taxable wage base for Social Security this year will rise by 2.9 percent, keeping the tax rate at 6.2 percent for employees and employers each.
Previously, this taxable wage base was set at $142,800. Now with the increase, the first $147,000 will be subject to contribute 6.2 percent of their earnings. That comes to $9,114.00 to the social security program (OASDI) in 2022 from the employee and the same amount from their employer.
People who are self-employed will have to pay at a tax rate of 12.4 percent, or $18,228.
This boost, which impacts around 12 million high-earning workers according to Forbes, will go towards the large bump in benefits for retirees since 1982, which saw an increase of 7.4 percent.
The cost-of-living adjustment (COLA) for Social Security benefit receipts will increase by 5.9 percent in 2022. The number only increased by 1.3 percent in 2021. This will average out to a roughly $92 increase for each retiree per month, bringing the total to $1,657. Retired couples will see an increase of $154 per month.
The only similar increase that has occurred in recent years was in 2009, where recipients saw a 5.8 percent boost.
The SSA also laid out how the increase will affect different retirees, such as widowed mothers, aged widowers, and disabled workers.
Medicare Part B and Part D premiums, which could increase next year, will reduce retirees’ overall amount of benefits, however, the official Medicare premium amounts have not been announced. Retirees can expect those in December. Both premium plans are automatically deducted from Social Security checks.
Social Security recipients who are below the full retirement age will be withheld $1 in benefits for every $1 earned above $1,630 a month (or $19,560 a year). When recipients reach the full retirement age of 66 years and two months (for those born in 1955) they will no longer face the penalty.
The SSA is set to run out of its trust fund by 2033. The Committee for a Responsible Federal Budget has warned that the administration is on its way to depleting the fund a year earlier, due to the higher cost-of-living payments.
Some have blamed the COVID-19 pandemic and the short recession it caused as the reason for a drop in revenue from payroll taxes which is hastening the rate at which Social Security funds are depleting.