Social Security Benefits Will Increase 5.9% in 2022

The Social Security Administration (SSA) has released its annual changes to the federal Social Security program that will take effect in 2022. This includes the cost-of-living adjustment (COLA), as well as Social Security tax, benefit, and earnings amounts.

Social Security Announces 5.9% Benefits Increase for 2022

The SSA has announced that Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 5.9% in 2022.

The 5.9% cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022. Increased payments to approximately 8 million SSI beneficiaries will begin on December 30, 2021. (Note that some people receive both Social Security and SSI benefits.)

Additionally, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $147,000 in 2022.

There is no limit on earnings for workers who are "full" retirement age or older for the entire year. The earnings limit for workers who are younger than "full" retirement age will increase to $19,560 in 2022. (The SSA deducts $1 from benefits for each $2 earned over $19,560.) The earnings limit for people reaching their “full” retirement age in 2022 will increase to $51,960. (The SSA deducts $1 from benefits for each $3 earned over $51,960 until the month the worker turns “full” retirement age.)

Cost-of-Living Adjustments (COLAs)

Congress enacted the cost-of-living adjustment (COLA) provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975. COLAs help Social Security and Supplemental Security Income (SSI) benefits to keep pace with inflation.

The Social Security Act specifies a formula for determining each cost-of-living adjustment. COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics.

Social Security Benefits

The latest COLA is 5.9% for Social Security benefits and SSI payments. This means that Social Security benefits will increase by 5.9% beginning with the December 2021 benefits, which are payable in January 2022.

Maximum amounts for Federal Supplemental Security Income (SSI) payments increase simultaneously with the cost-of-living adjustments that apply to Social Security benefits. The latest increase, 5.9%, becomes effective January 2022. The maximum monthly amounts for 2022 are $841 for an eligible individual, $1,261 for an eligible individual with an eligible spouse, and $421 for an essential person.

Social Security Taxes

Some people are required to pay federal income taxes on their Social Security benefits. This usually happens if you have other substantial income in addition to your benefits (such as wages, self-employment, interest, dividends, and other taxable income that must be reported on your federal tax return).

Based on IRS rules, you will pay tax on 85% of your Social Security benefits. If you:

  • File a federal tax return as an "individual" and your combined income is:
    • between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits
    • more than $34,000, up to 85% of your benefits may be taxable
  • File a joint return, and you and your spouse have a combined income that is:
    • between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits
    • more than $44,000, up to 85% of your benefits may be taxable
  • Are married and file a separate tax return, you probably will pay taxes on your benefits

Each January, you should receive a Social Security Benefit Statement (Form SSA-1099) showing the amount of benefits you received in the previous year. You can use this statement to find out if your benefits are subject to tax when you complete your federal income tax return.

Note that if you do have to pay taxes on your Social Security benefits, you can make quarterly Estimated Tax payments to the IRS or choose to have federal taxes withheld from your benefits.