Social Security recipients can see cost-of-living adjustments (COLAs) that will increase their benefits when inflation justifies it. The inflation rate has been low over recent years, so the adjustments have been minimal.
Last year, the COLA was just 1.3 percent, and it was 1.6 percent the previous year. This sounds disappointing, but there were no adjustments at all in 2010, 2011, and 2016. The COLA in 2017 was a microscopic .3 percent.
This time around, the adjustment is going to be considerably higher because we are seeing a good bit of inflation. Based on the data that is current right now, the cost-of-living adjustment for 2022 would be 6.2 percent.
Possible Long-Term Change
President Joe Biden has proposed a number of different actions that would benefit senior citizens. One of them is a change in the index that is used to determine the Social Security cost-of-living adjustments.
The Consumer Price Index for Urban Wage Earners and Clerical Workers is used at the present time. It measures data for people of all ages, but senior citizens have specific needs.
With this in mind, Biden would like the Social Security Administration to start using the Consumer Price Index for the Elderly. If this was utilized, the adjustments would be higher because they would be based on senior citizen spending.
When Do You Start to Collect Social Security?
You can accept an early benefit when you are 62 years old, but it would be reduced. Depending on your birth year, you would get between 25 and 30 percent less than you would receive if you wait until you are old enough to qualify for a full benefit.
There is another important consideration that applies to an early benefit. If you are working and you make more than $18,960 a year, your benefit would be reduced by a dollar for every two dollars you earn that is above this threshold.
The full eligibility age is 66 if you were born in 1954 or an earlier year, and it is 67 if you were born in 1960 or a later year. For people in the middle, the eligibility age goes up by two months each year after 1954.
Someone that was born in 1955 would become eligible two months after their 66th birthday. A person born in 1956 would become eligible four months after they turn 66, and so on until 1960.
Are All Seniors Eligible?
You will be eligible if you have at least 40 retirement credits. Four credits are awarded each year if you work and pay taxes, so the vast majority of people do in fact qualify. If you do not have the 40 credits, you could become eligible on your spouse’s work record.
How Much Do You Get?
Your benefit amount is based on your earnings. The Social Security Administration (SSA) uses the 35 years during which you earned to the most amount of taxable income.
In 2021, the average benefit is $1543 a month, and the maximum benefit for a person that retires when they are eligible for a full benefit is $3148.
There is a maximum benefit because there is a maximum amount that can be taxed for Social Security purposes. This figure is $142,800 in 2021.
You can register your account on the SSA website to see what your benefit will be based on your work record and anticipated future earnings.
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The best way to learn about the most important estate planning topics is to attend one of our in-person seminars. They are held at desirable locations throughout our service areas, and there is no charge, so this is a time investment that will yield dividends.
You can see the dates if you visit our seminar page, and when you identify the one you would like to attend, follow the instructions to register so we can reserve your seat.
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If you are ready to work with a Glastonbury, Connecticut estate planning lawyer to put a plan in place, we are here to help. You can send us a message to request a consultation appointment, and we can be reached by phone at 860-548-1000.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.
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