The Social Security Administration released several figures pertinent to both retirees. workers and self employment taxes.These statistics reveal there’s been a large increase in the worker wage base and a modest boost to retirement benefits.
These figures demonstrate the continuing strength of the US economy. But the social security cap will be changing as a result.
An Increasing Wage Base
The social security cap for 2021 will rise by 3.6% in 2022, to $137,700. This is the amount of earnings subject to the Social Security tax. For high-income workers, this will mean a bigger tax bill at the end of the year.
The reason for the increase is the growth in wages. So now the maximum tax for all workers will be $17,074,80. The maximum that can be withheld from a paycheck will be $8,537.40. Both employers and employees pay half the total Social Security tax.
These social security cap limits don’t apply to those who have reached full retirement age.
Why its Good News for Retirees?
The cost-of-living adjustment (COLA) is the key figure for retirees to look out for. 63 million retirees will receive a 1.6% COLA increase. So, this will mean the average benefit rises by $1,503 per year. A retired couple will see an increase of $2,531 per year in benefit payments.
However, retirees do need to keep in mind that premiums on Part B and Part D Medicare will also increase. For now, though, the official numbers haven’t been released so we don’t know how significant this will be.
What About Earnings Limits for Workers Under Full Retirement Age?
Recipients who are under the age of 66 will see their benefits docked by $1 for every $2 in earnings above the maximum limit of $1,520 per month. Any worker who turns 66 in the yearcan earn $4,050 per month before their birthday without having their benefits docked.
But anything above this limit means they will lose $1 in benefits for every $3 they earn.
Source: Bestirstaxrefund.com