The SSA released the final figure for the 2022 COLA increase which affects nearly 70 million Americans collecting social security and SSI benefits. The 2022 raise was 5.9%, which translates to an extra $92 in retirees’ average monthly benefit next year. It was nearly 5 times last years increase.
See the latest on the 2023 COLA increase in this article.
The 2022 raise is the largest increase since 1982. A similar increase of 5.8% occurred last in 2008, during the global financial crisis (GFC)! The 5.9% raise in benefits will flow to more than 64 million Social Security beneficiaries in January 2022.
Increased payments to approximately 8 million SSI beneficiaries will begin from December 30, 2021.
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Wage Earners to See Higher Social Security Taxes
For wage earners the COLA increase also means that the maximum amount of earnings subject to the Social Security tax will increase to $147,000 in 2022 from $142,800 this year, a 2.9% increase. This will mean more SSA taxes withheld in 2022 and lower take home pay overall.
Social Security Item
|Increase over previous year||5.9%||1.3%||1.6%||2.8%|
|Maximum taxable earnings (wage base) subject to social security taxes||$147,000||$142,800||137,700||$132,900|
|Maximum social security benefit (per month)||$3,345||$3,148||$3,011||$2,861|
|Estimated average monthly social security benefit (all workers)||$1,657||$1,565||$1,503||$1,459|
|Self-Employed social security tax rate||15.30%||15.30%||15.30%||15.30%|
|Employee social security tax rate (deducted from your paycheck)||7.65%||7.65%||7.65%||7.65%|
Is this really a raise for Retirees?
Roughly half of Americans aged 65 and older relied on Social Security for 50% or more of their income in 2019, according to an AARP analysis.
So this raise is all relative because if inflation in the broader economy is higher than this, the raise will be quickly eaten up the higher cost of goods and services.
This is especially the case with Medicare where Part B premiums are expected to rise by over 10%, which would quickly consume the COLA raise and leaving millions of elderly Americans worse off since the pandemic started.
When Will Social Benefits run out sooner?
Based on the last report (in August) from the Social Security Board of Trustees the SSA trust fund is projected to become depleted by 2034, a year earlier than estimated in 2020. At that time, Social Security income would only be sufficient to pay about 78% of scheduled benefits. With this 5.9% raise that could be accelerated by 3 to 4 months.