The nation’s more than 64 million Social Security beneficiaries will receive a 5.9% bump in Social Security benefits in 2022. This cost-of-living adjustment, the largest increase the Social Security Administration has given beneficiaries in 40 years, is a response to the recent inflation. The COLA formula is based on the increase in the Consumer Price Index.
On average, the cost-of-living adjustment will put nearly an extra $100 a month in the pocket of all retired workers ($1,657 in 2022, compared with $1,565 in 2021). A widowed mother with two children will see average monthly benefits rise to $3,187 from $3,009. The maximum monthly Social Security benefit for a worker retiring at full retirement age will rise to $3,345, from $3,148.
In 2022, the maximum amount of an individual’s taxable earnings that’ll be subject to the Social Security tax is $147,000. That’s a $4,200 increase over 2021.
Greater Savings Opportunities
The IRS recently announced cost-of-living adjustments for contribution and benefits limits for qualified retirement plans for 2022.
The contribution limit for employees participating in 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Saving Plan, will increase to $20,500 from $19,500 in 2021. However, the catch-up contribution limit for employees age 50-plus who participate in these plans remains unchanged at $6,500. The amount individuals can contribute to SIMPLE retirement accounts will be $14,000, up from $13,500. The catch-up contribution limit for employees age 50-plus who participate in SIMPLE plans also remains unchanged ($1,000).
The income phase-out range for taxpayers making contributions to a Roth IRA is increased to $129,000 to $144,000 for singles and heads of households (from $125,000 to $140,000 in 2021). For married couples filing jointly, the income phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.
