PENSION IN THE USA: INNOVATIONS THAT ARE WAITING FOR US IN 2022

Social Security next year won't look like it used to. - Some people will pay more Social Security taxes next year.

- Retirees are queuing for larger benefits.

- Retirees can work more without compromising their benefits.

In the United States, most Americans either pay into or receive benefits from Social Security. That's why program changes can affect almost every family.

Some of these changes will take place in 2022, according to a new statement from the Social Security Administration.

Here are three ways the benefits program will look different after the New Year.

Older people will get bigger checks

Nearly every year, retirees receive a Cost of Living Adjustment (COLA) that increases their benefits. This will be the case in 2022.

In fact, older people will indeed get the biggest COLA over 40 years and will see a 5.9% increase in profits.

This means that the average Social Security benefit for all retirees will increase from $1,565 in 2021 to $1,657 in 2022. Although it is good news that older people will get this extra money to keep their benefits from losing purchasing power.

But pensioners should understand that this increase is a direct result of high inflation.

Retirees should budget carefully to account for the additional costs they will incur. due to rising prices to make the most of their larger allowances.

Retirees can work harder, this does not affect the amount of benefits

Each retiree has a full retirement age (FRA), which will be between 66 and four months, and 67 for those who reach the FRA in the next year.

If you have not yet completed your FRA, you have the option to claim retirement benefits if you are at least 62 years old. However, this will mean a reduction in your monthly checks.

If you receive benefits before the FRA, there is an important caveat to keep in mind. If you work and earn too much, you lose some of your Social Security income.

The good news is that one change coming next year will allow retirees to earn a little more money without their Social Security benefits disappearing.

In 2021, older workers who missed the FRA for an entire year were allowed to earn $18,960 before losing $1 for every $2 of excess earnings.

In 2022, this amount will rise to $19,560. And for those who reach the FRA within a year, the income cap will be $50,520 in 2021, after which benefits will be reduced by $1 for every $3 of additional income. In 2022, this figure will rise to $51,960.

Some workers will pay more Social Security taxes

Most current workers pay Social Security tax on all the money they earn, but not all.

Some people earn more than the "base salary" limit fee", which is the maximum annual income subject to Social Security tax.

Any money earned in excess of the base salary limit is tax-free and does not count toward retirement benefits.

The base wage cap will change in 2022, meaning some high-paying workers will end up subject to higher Social Security taxes.

In 2021, the maximum salary subject to Social Security tax was $142,800, but it will rise to $147,000 in 2022.

Because workers pay a 7.65% Social Security tax, this means workers can pay up to $321.30 in additional taxes. The self-employed pay twice as much since they don't have an employer that pays half their Social Security tax, so they could end up paying $642.60 more over the course of the year.

Both current and future retirees should be aware of these changes so they can be prepared for how it could affect their tax bills and benefit checks.

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Social Security next year won't look like it used to. - Some people will pay more Social Security taxes next year.

- Retirees are queuing for larger benefits.

- Retirees can work more without compromising their benefits.

In the United States, most Americans either pay into or receive benefits from Social Security. That's why program changes can affect almost every family.

Some of these changes will take place in 2022, according to a new statement from the Social Security Administration.

Here are three ways the benefits program will look different after the New Year.

Older people will get bigger checks

Nearly every year, retirees receive a Cost of Living Adjustment (COLA) that increases their benefits. This will be the case in 2022.

In fact, older people will indeed get the biggest COLA over 40 years and will see a 5.9% increase in profits.

But pensioners should understand that this increase is a direct result of high inflation.

Retirees should budget carefully to account for the additional costs they will incur. due to rising prices to make the most of their larger allowances.

Retirees can work harder, this does not affect the amount of benefits

Each retiree has a full retirement age (FRA), which will be between 66 and four months, and 67 for those who reach the FRA in the next year.

If you have not yet completed your FRA, you have the option to claim retirement benefits if you are at least 62 years old. However, this will mean a reduction in your monthly checks.

If you receive benefits before the FRA, there is an important caveat to keep in mind. If you work and earn too much, you lose some of your Social Security income.

The good news is that one change coming next year will allow retirees to earn a little more money without their Social Security benefits disappearing.

In 2021, older workers who missed the FRA for an entire year were allowed to earn $18,960 before losing $1 for every $2 of excess earnings.

Some workers will pay more Social Security taxes

Most current workers pay Social Security tax on all the money they earn, but not all.

Some people earn more than the "base salary" limit fee", which is the maximum annual income subject to Social Security tax.

Any money earned in excess of the base salary limit is tax-free and does not count toward retirement benefits.

The base wage cap will change in 2022, meaning some high-paying workers will end up subject to higher Social Security taxes.

In 2021, the maximum salary subject to Social Security tax was $142,800, but it will rise to $147,000 in 2022.

Both current and future retirees should be aware of these changes so they can be prepared for how it could affect their tax bills and benefit checks.

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Some people believe in myths about retirement. For example, about how much they will spend and where they will live, but at the same time they do not realize that in reality everything can be different. By the time they know the truth, it will be too late to make adjustments to the pension plan.

You can always work longer if you don't have enough savings

It's not uncommon for people to think they can just postpone retirement or work part-time if they have meager savings. According to the 2021 Pension Confidence Survey, 72% of workers think they will continue working after retirement.

Reality: While most workers think they will still get paid after they retire, in fact, according to the survey, only 30% of retirees actually worked for a paycheck. Moreover, the study found that almost half pensioners left their jobs earlier than expected.

Some people may retire early because they have the financial means, but health problems or family needs can crowd out others ahead of schedule.

Your Social Security benefits will cover all your expenses

The study found that 87% of workers and 92% of retirees expect Social Security to be a source of income when they retire. According to a study by the Transamerica Center for Retirement Research, 69% of baby boomers believe that social security will be their main income.

Reality: Indeed, many workers rely on Social Security to pay most or all of their bills. But if you plan to do so, you may need to change your lifestyle. The Social Security Administration says these benefits were never intended to fully replace your pre-retirement income.

If you start receiving benefits when you reach full retirement age in 2021, Social Security will only cover about 28% of your pre-retirement income if you make good money. According to the government, the percentage is 42% for people with average incomes and 78% for people with very low incomes.

After you retire, you won't pay a lot of taxes

When you leave your job, you hope big tax bills are a thing of the past. The problem is that many retirees ignore the tax liabilities that can come with their retirement income.

Reality: If you have a traditional IRA or 401(k) account, you will need to pay income tax on all of your withdrawals. You will also not be able to avoid paying tax if you postpone withdrawals indefinitely, as the government requires minimum payments from the age of 72.

Also, your Social Security benefits may be taxed if you earn too much from various sources of income.

When you retire, you will spend significantly less

Retirement saves you from commuting, shopping for business clothes, or working lunches. However, this does not mean that your costs will drop significantly.

Reality: According to the 2020 Consumer Spending Survey by the Bureau of Labor Statistics, people aged 65-74 spent an average of $52,356 last year. That's a big expense, and probably more than many expected before retirement.

You can live in your home for the duration of your pension

For many people, growing old in their own home is the preferred way to live out their golden years.

Nearly 90% of Americans aged 50 and over want to grow old in the home they grew up in and don't want to move to institutions, according to a 2021 survey by non-profit aged care organization Capital Caring Health.

Reality: People have the right to want to age at home, but it's not always possible.

The United Disabilities Services Foundation, a non-profit organization, says that only 1% of US homes are equipped for the comfort of the elderly. Perhaps this is one of the reasons why 37% of citizens in this age group receive medical care in special institutions.

Medicare will cover all your medical expenses

If you fail to plan for your health care costs, it could hinder your retirement. Medicare provides health insurance to millions of Americans aged 65 and over, but you can't expect it to cover all of your costs.

Reality: Depending on your Medicare plan, you may not have coverage for dental care, vision care, or hearing aids. Also, no Medicare plan will pay for ongoing long-term care. Overall, Fidelity's health care cost estimate suggests that a couple retiring at age 65 in 2021 will need about $300,000 to pay for medical expenses at retirement, and this does not include long-term care costs.

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