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Retirement / Social Security


Retirement / Social Security

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Social Security might seem like a staid, never-changing government benefits program, but the reality is that certain details about Social Security change nearly every year. In 2021, some major changes were announced to the program, particularly when it comes to the annual cost-of-living adjustment. However, the year also saw some other notable changes to Social Security that you should be aware of, whether you’re close to retirement or far from it. Here are the most significant Social Security changes for 2021 that could impact the choices you make in your retirement planning. 

Social Security Schedule: When the First COLA Checks Will Arrive in January 2022
Social Security 2022: How the COLA Will Increase Benefits for the Average Senior Couple

Increase in Social Security Wage Base

Social Security is funded primarily by taxes on wages. Workers pay 6.20% of their income to Social Security, with an additional 1.45% to Medicare, and employers pay a matching amount on behalf of employees. However, income above a certain level, known as the Social Security wage base, is not subject to Social Security taxes. For 2022, the wage base takes a significant jump, from 2021’s $142,800 to $147,000. This means that high-income taxpayers will be paying Social Security taxes on an additional $4,200 in earnings. 

Find Out More: The Biggest Problems Facing Social Security

Social Security Trust Fund Will Run Out Sooner Due to the Coronavirus Pandemic

 The Old-Age and Survivors Insurance Trust Fund, which is the fund that collects the taxes paid to provide Social Security payments, is slated to run out of money by 2033. This projection is one year earlier than the 2034 estimate that the Social Security Administration made prior to the outbreak of the coronavirus.

If and when the Social Security trust fund does run out of money, this doesn’t mean that Social Security will cease to exist, in spite of what some alarmists may report. What it does mean is that the only source of funding for Social Security retirement benefits will by the amount raised by Social Security taxes on existing workers. Unless adjustments are made to Social Security before that date, retirees might only receive about 78% of their expected payouts. However, various solutions to this dilemma have been proposed, including raising the Social Security wage base, which would generate additional Social Security taxes, or pushing back the date of full retirement, which would reduce the amount of total benefits paid out. 

See: All the States That Don’t Tax Social Security



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