Stock Groups

People will get bigger Social Security checks in 2022. How to prepare

[ad_1]

Getty Images| AFP | Getty Images

Social security recipients will soon receive larger checks.

The 2022 cost-of-living adjustment will be 5.9%, the Social Security Administration said Wednesday.This bump will allow beneficiaries to keep pace with inflation-related rising costs. It is about the 40th largest increase.

More than 70 million Americans will see larger checks as a result of the adjustment. The Dec. 30 change will affect approximately 8 million Americans who receive Supplemental Security Income (or SSI), while 64 million people receiving Social Security will be affected by the January increase.

The 2022 or cost-of-living adjustment will add roughly $92 a month to an average retirement benefit of $1,565 a month, according to some estimates.

Nancy Altman is president of Social Security Works. She is an advocate group that focuses on increasing benefits.

This year’s COLA is for beneficiaries.

What are your options?

People already getting Social Security do not need to do anything to get the increase — checks will be automatically adjusted.

Prior to that, though, the recipients should look at their monthly finances to determine if it is possible to put this extra money to work.

Certified financial planner: “They need to really look at the numbers, and what that increases means to them. What it will mean to their monthly checks.” Diahann LassusPeapack Private wealth Management’s principal, Lisa, is located in New Providence. She said that having extra cash each month can help people reduce their debts or save some for an emergency fund.

“It’s kind of like when you’re working and getting a salary increase — are their other things you can do for you?” Lassus agreed.

The adjustment will be affected by inflation and Medicare

Social Security recipients should be aware of the fact that COLA doesn’t apply to them. necessarily be able to spend more or have a bigger budget — it’s to keep their cost of living the same as prices rise due to inflation.

Inflation is causing inflation to cause an increase in the prices of rent, food, fuel, utilities, and other items.

Additionally, premiums for health care services will not cause a 5.9% rise in the rate of increase for people who have Medicare or Medicaid. In November, premium increases for Medicare Part A are expected. A new report by Medicare trustees estimates that Part B will see a $10 rise, bringing the monthly rate up to $158.50 per month in 2022. It was previously $148.50.

These payments, which are usually taken from Social Security, may be a part of the adjustment. The hold harmless provision, however, protects individuals from receiving smaller Social Security checks due to Medicare and Medicaid.

Altman stated that Medicare premiums might mean you won’t get much more. She said beneficiaries must receive in December a letter from Social Security Administration outlining their check for 2022 after premiums have been announced.

Taxes may go up

Trenda Hackett at Thomson Reuters, CPA, and technical tax editor, said that if Social Security is your only source of income, then there won’t generally be any tax changes. 

However, your income may make part of your check taxable if you have other sources of retirement savings or are working to receive benefits.

She stated that taxpayers who have other income sources than the minimum threshold amount in addition to Social Security benefits, should expect an increase in their taxes if they are expected to earn more than the base.

You can avoid unexpected surprises at tax time by consulting a tax advisor to ensure you understand the impact of any adjustment on your taxable income.

It is possible that there will not be any other major adjustments for some time.

Social Security beneficiaries shouldn’t be discouraged from requesting similar increases next year, even though there was a record amount of adjustment.

The big leap in 2022 could signal that no major adjustments will be made in the future. In 2009 there was an identical increase of 5.8%. were no adjustments for the next two years.

Altman stated that people shouldn’t say “oh, good, this will happen every year,” 

SIGN UP Money 101 is an 8-week learning course to financial freedom, delivered weekly to your inbox

SEE ALSO: How to make money with creative side hustles, from people who earn thousands on sites like Etsy and TwitchVia Grow with Acorns+CNBC

Disclosure: Comcast Ventures is an investor in NBCUniversal. Acorns

[ad_2]