2022 Social Security Increase- 3 Things You Should Know
As we age and get closer to collecting Social Security benefits, it is essential to understand what is to come. We know for sure that Social Security isn’t going to run out but has the rate available to eligible folks kept up with the times?
We put together our three main takeaways for the increase in Social Security benefits for 2022 to give you a one-stop-shop for the necessary information.
Quickly, how we got here.
The Social Security system, created in 1935, was intended to provide general welfare to aged and disabled citizens. The system has had its ups and downs over the years as the economy fluctuated drastically, and the surge of baby boomers retiring threw a giant wrench into the mix. Since then, the Social Security Administration has shifted gears and continuously assessed the economic situation to be able to provide this benefit for years to come.
One of the methods used to combat the influx of benefits going to the boomers retiring was to create an incentive to wait to start receiving benefits. The absolute earliest you can begin pulling Social Security payouts is 62. Still, if you start receiving benefits before your FRA (full retirement age), which is 67 years old for anyone born after 1960, you will receive a reduced payout for the entirety of the payouts. By incentivizing folks to wait, the system is able to build funds and stay in the green. In fact, if you can hold out until 70 to begin your SS benefits, you can receive up to 32% more annually!
Why is this increase a big deal?
The government uses the Consumer Price Index (CPI) annually to assess cost-of-living adjustment (COLA) for Social Security benefits. Much like the chaos that was 2020, 2021 saw an unprecedented economic change with consumer prices rising at unfounded rates. Because of this, the rate is expected to go from 1.3% in 2021 to between 5.8%-6.2% (depending on the source). This would result in an average of ~$70 more per check-in 2022 for recipients. This is the most significant hike in benefits since Regan was in office in 1982! This increase is meant to help senior citizens and disabled folks financially, even with the rising consumer prices across the board.
Between labor and supply shortages caused by the pandemic, ever-growing gas prices, and general cost of living increases, the demand has not slowed down. This has only driven prices even further up and left the 2021 COLA increase of 1.3%, almost laughable as we head into 2022. These price hikes have affected retirees in a big way, and the hope is that this coming years’ increase is significant enough to last the year and let the demand catch up with the supply.
What can you do to prepare?
Now that we have the information, how do we ensure we’re ready when the inevitable retirement rolls around? First off, make sure to use your resources. While the Social Security system is meant to be easy to access, it is often anything but easy, and you may find yourself needing assistance. This is where having a lawyer who specializes in Social Security in your corner is vital. The Franco Law Firm team is well-versed in such cases and can help you get all of the paperwork together and be your support system throughout.
Secondly, inflation isn’t going anywhere, so planning is vital. Commonly the Social Security payout is not enough to survive on by itself. These benefit payouts are not the same as a retirement fund but rather like an earned payment from your years of working. We are seeing more and more retirees finding supplemental income by picking up part-time jobs that fall into the “gig” economy like food delivery. This is why it is essential to have a retirement plan in place well before you are Social Security age to have something to fall back on. You can do so through simple savings, invested funds, or a combination of the two, which we recommend. The amount of money you have set aside depends entirely on what you want your retirement to look like.
So now is the time to take stock of your wants and needs! To help with your planning, AARP created a helpful Social Security benefits calculator. Along with the very informative article, this calculator will help you start wrapping your head around what to expect and what to prepare for. It’s never too soon to start planning for retirement!We know that was a lot of information, but knowing the facts about the Social Security system will only help you as you approach retirement. If you need more information, our team at Franco Law is ready and willing to give you our undivided attention. Let’s make sure you are prepared for what’s to come so that your retirement years are, in fact, your golden years!