President Biden’s Inflation Reduction Act included provisions to help seniors and retirees pay Medicare costs. These include capping insulin costs, making vaccines free, and limiting out-of-pocket costs for Medicare Part D prescription coverage.
Good question: Can I still work full time if I get Social Security at age 62?
Also Learn: How Much Does a Social Security Person Earn?
But 2022 will see big changes in another major program that tens of millions of seniors rely on after retirement: Social Security.
Many of the most important updates would have happened anyway, regardless of who was in the office. But President Biden is also pushing for a sweeping overhaul of programs that require legislative action.
Another big COLA coming in the new year
In 2021, President Biden oversaw the largest Social Security Cost Adjustment (COLA) in 40 years, a 5.9% increase that will take effect in 2022. His COLA this year jumped to his 8.7%. This increase will increase the average payee’s monthly check by $146, from $1,681 to $1,827.
The last two COLAs, one of the largest ever, will come into force during the Biden administration’s tenure, but their supporters cannot directly credit the president and their critics directly credit him. I can’t blame them.
COLA emerged during the hyperinflationary era of the 1970s, when the purchasing power of seniors’ pensions, entitlements and bonds declined at a record pace. Until the mid-1970s, Social Security benefits could only be increased by action of Congress. However, the 1972 Social Security Amendment included a COLA provision that automatically adjusted payments for inflation.
The first automatic COLA (an 8% increase in benefits) went into effect in 1975, and there have been new adjustments almost every year since. The biggest so far was his 14.3% increase in 1980, and the following year he had an 11.2% increase.
The COLA is a direct reflection of inflation, not the president’s leadership or lack thereof.
Taxable income and earnings test caps to increase in 2023
The Social Security Old Age, Survivor and Disability Insurance (OASDI) program is funded through a 12.4% tax on income. The employer and employee split the bill, with each party contributing her 6.2% of all checks. Another 2.9% of her funds Medicare, with employers and their workers each paying 1.45%.
The cost of being your own boss is called the self-employment tax. Sole proprietor he must pay the full amount of 15.3%.
These percentages are fixed rates set by law, but the OASDI caps the amount of taxable income an individual or couple must pay. In 2022, individuals paid Social Security and Medicare taxes on income up to $147,000. By 2023, taxable income will reach $160,200.
Another adjustment from 2022 deals with the so-called income test. SSA temporarily reduces payments for beneficiaries who claim benefits before full retirement age but continue to earn.
The maximum allowable income for 2022 was $19,560, or $51,960 for the year set to the year the breadwinner reaches full retirement age. $21,240 in 2023 and he jumps to $56,520. Benefits are not reduced for income earners who have reached full retirement age.
Social Security, as always, was political football in 2022
Social Security will take 12 years from the inevitable 23% reduction in benefits in 2034 without legislation. Both Republicans and Democrats spent their time heading into the midterms attacking the other party’s ideas while pushing their own plans to preserve profits or cut costs.
President Biden ridiculed proposals from top Republican leaders that included abolishing Social Security and Medicare every five years and reevaluating both programs annually.
Meanwhile, top Democrats are calling for expanded Social Security and Medicare by raising the taxable income cap to $400,000 and taxing those earning more than $250,000 a year.
Biden includes changing the way SSA measures inflation from the Urban Wage and Office Workers Consumer Price Index (CPI-W) to the Elderly Consumer Price Index (CPI-E) , suggested other drastic changes. The President believes this change more accurately reflects the actual cost of living increase most beneficiaries will experience.
Biden also wants to raise the special minimum benefit paid to low-income workers to 125% of the poverty level and raise the primary insurance amount (PIA) to account for higher late-life spending.
Opponents of the president’s proposal, including the conservative Heritage Foundation, argue that while Biden’s plan will hasten bankruptcy and worsen the budget deficit, it will inevitably raise taxes on ordinary households.
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This article originally appeared on GOBankingRates.com: The Impact of President Biden on Social Security in 2022
