Unknown: Historic, there's no other way to put it. The recent
Social Security cost of living adjustment increase is the
biggest in 39 years, I want to share that with you, along with
several other big changes to Social Security. And I also want
to share to you maybe a little bit of a negative impact as a
result of the Social Security cost of living increase. But
before we get there, subscribe to my channel, I have over 30
years of experience I want to share with you, I want you to
get the wisdom from the conversations I have with my
clients, so you can make better informed decisions. So these are
very interesting times. For those of you who are relying
upon social security for year over year to get those increases
to keep up with inflation. These have been very trying times,
because the reality is over the past 15 years, that Social
Security cost of living adjustments have hovered on
average, somewhere around one and a half percent. But we've
seen real inflation go up for those who are retired at a
higher level, much due to the health care inflation that we
are all seeing. So we've really been dependent not only upon the
Social Security increases, but for many of us the interest that
we have been earning on our bond store fixed income. And with the
almost zero interest rates that we're getting on fixed income
and bonds of late, it's been a very trying time. So this
couldn't have come at a better time. So let's step back for a
moment and sort of split it into two different viewers, if you
will, for those of you who are collecting Social Security, you
rely upon that fixed income and the annual increase, hopefully,
that you get so that you can continue to pursue your
retirement dreams. And the cost of living is the way you get the
increase. Now, as I mentioned, it hasn't been a large increase
over the past 15 years on average. But the reality is,
it's been more than those who have been getting most pensions,
because the pension is fixed when they retire, and typically
has no cost of living adjustment. So even though it's
just been nominal for Social Security, the reality is, Social
Security is very valuable in that there is a cost of living
adjustment. Now for those who have yet to take Social
Security. What we know is that we can get delayed credits from
social security at a rate of 8% per year, take a look at my
video, and you'll see more about that. But many don't realize
they also get the 8% plus any cost of living increases. And
historically, or what the Social Security administrative trustees
have said looking forward is that you can sort of plan for
about a two and a half percent cost of living increase over the
next many years. So if you think about it in that way, certainly
no guarantees, right? But you can sort of plan for somewhere
between an eight and 10% increase for each year you delay
Well, this cost of living increase may change. The year
you take now Social Security if you were on the cusp of thinking
about taking it next year. Now there are 567 different claiming
strategies. And in my latest book don't outlive your money in
retirement. I devote the entire second chapter to social
security and the questions surrounding it. So go up to my
banner, click on free chapter, we'll get you the free chapter
plus, frequently asked questions and some worksheets so you'll
have more clarity on how you can make the right choice and not
leave 10 maybe even hundreds of 1000s of dollars of lifetime
income behind for your household. So this is a really
big decision and this cost of living increases It's going to
be very impactful for many, mostly positive, but
stick around, I have a negative to share with you at the very
end as a result of this cost of living increase, but so much of
it is about the planning, right? It's not just social security
and which one you take. But you have to coordinate this width,
other income, portfolio income, required minimum distribution at
age 72. What income Do you need, Where's it coming from? So
remember, this topic, very important, planning, even more
so. So let's take a look at the five big changes for 2022 With
regards to Social Security, so the first big change, and this
is what we've been waiting for, right? inflation is back, which
has been sort of bad news for a lot of people in terms of what
they're paying for things. But as I said on this channel,
before, there's a silver lining here. And that's with regards to
the cost of living increase we were expecting, upcoming for the
year 2022. So to step back for just a moment, the way that
Social Security calculates that next year's cost of living
adjustment is based on the CPI w index. And if you take a look at
this chart, I'll share this with you. So Social Security
Administration looks at the third quarter numbers year over
year for the CPI W and as you can see here, it's the third
quarter, July, August and September, and that hit take the
average, the average of that index was 253.412. Then they
took a look at this year's average of the three numbers and
they came up with 268.4 to one. And that's where they come up
with the fact that year over year, we got a 5.9% increase for
cost of living looking forward to 2022. That's great news,
again, reflecting upon the income that we get from our
portfolios, particularly the bond area where fixed income
area where it's been very challenging, where interest
rates are near zero, maybe a little bit more than that, but
then the we get taxed on it. This 5.9%, the biggest increase
since 1982 is really very welcome news. The second big
change is in regards to the average benefits that people are
going to be receiving. So let me take you to my screen again. So
as you can see here, going from 2021 to 2022. For all retired
workers, the number goes from $1,565 up to $1,657. on a
monthly basis. If you're a couple with both collecting
Social Security, we move upwards to $2753 per month from $2599.
If you're a survivor, post the age of 60, it moves up to $1553
from $1467. And let's take a look at disability benefits also
which are impacted. On a positive basis, that number
moves up to $1,358. All of that is good news if you're dependent
upon this income, but again, wait to the last point because I
think we have something we have to ponder as a result of this.
So the third element, the third big change is the amount you
have to earn for one credit. So let's digress for just a moment
here. Okay, basic social security knowledge, you have to
have 40 quarters in order to be eligible to collect Social
Security, which for most people is 10 years. If you work at all
of the 10 years, however, it's the top 35 years that they count
towards your benefit and then the calculation they have within
it. But you have to earn a certain amount in each quarter
in order to get that credit. So let's take a look at what
they've done. So as you can see here, in 2021, you needed to
earn $1,470 to earn one credit. Now you must earn $1,510. The
fourth big change is with regards to maximum taxable
earnings. So in 2021, the maximum that you could be taxed
on in terms of If your income was $142,800, that number for
2022 has been moved upwards to $147,000. So the impact to you
is this. For a self employed individual, it's a $520
additional tax. If you're a W-2 employee, it's a $260 additional
tax, the fifth and final changes with regards to your earnings
limit. Now, what is that in reference to. So if you're
collecting Social Security, at age 62, but not yet full
retirement age, whatever that is for you, somewhere between 66
and 67, depending upon when you were born, then there will be an
offset of the social security benefits that you're receiving,
depending upon how much you're going to earn that year. As you
can see, in 2020, that limit was $18,240. For 2021, it was
$18,960. And in 2022, it will be $19,560. So anything you earn
above that number for next year, there will be some offset.
Remember, you will get that back in a prorated fashion, once you
start collecting your Social Security. Now I did mention to
you, there may be one negative impact that we have to think
about as a result of this historic 5.9% increase. And
that's with regards to liquidity of social security and whether
or not Social Security is going to go bankrupt. Well, in
essence, the trustees have said in their report that we have
enough money to pay 100% of the guaranteed benefits up until
about the year 2034, 2035. With this increase for the cost of
living of 5.9%. Some reports have come out that said that
that may come back down to the year 2033. Now remember, that
doesn't mean Social Security is going bankrupt. It just means
that if we do not make any changes at all, with regards to
how social security is funded, or we pay it out, that only
about 80% of the 100% guaranteed benefits will be able to be
paid. If it's my professional opinion. Certainly no
guarantees. It's just the way Congress in Washington work.
We'll address this as we get closer and be able to kick the
can down the road a little bit. I'm not really concerned,
because at this point, we're celebrating the fact that we've
got our 5.9% increase. For more information on Social Security,
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