If you’ve been following the news, you may be aware that inflation is up, gas prices are soaring, and the stock market’s been stuck in an ongoing slump. But how up-to-date are you on Social Security?
If you’re not yet at an age where you’re collecting benefits, Social Security may not be on your radar, and understandably so. But it’s important to keep tabs on the program nonetheless.
For one thing, those benefits might end being an important income source for you eventually. And also, the moves you make during your working years could set you up for higher benefits down the line.
Plus, even if you’re not collecting Social Security at present, if you’re earning money, you’re paying taxes to fund it. And so it’s important to understand what those taxes look like. With that in mind, here are a few recent changes to Social Security that you may not be aware of.
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1. Benefits got a 5.9% raise
Why should you care what raise Social Security got this year if you’re not getting benefits yet? Namely, because you should know that 5.9% was the program’s largest raise in decades — and it’s already falling short due to rapid levels of inflation.
In fact, understanding Social Security’s shortcomings should prompt you to build a nest egg of your own rather than plan to fall back on those benefits down the line. Chances are, they won’t do a good enough job of covering your senior living costs — not even close.
2. The wage cap increased
Social Security gets most of its revenue from payroll taxes. But workers don’t pay those taxes on all of their earnings. Instead, there’s an annual cap that’s put into place.
Last year, wages of up to $142,800 were subject to Social Security taxes. This year, that cap has increased to $147,000. If you’re a higher earner and you’re not sure why your paychecks have been shrinking, this could be your answer.
3. The value of work credits rose
Being able to collect Social Security in retirement isn’t a given. To qualify for benefits, you’ll need to earn enough money to accrue 40 work credits in your lifetime.
The value of a work credit changes from year to year, and you can earn up to four work credit annually. Last year, a single work credit was worth $1,470 of earnings. This year, you’ll need $1,510 in earnings to snag a work credit.
If you have a full-time job, work credits are something you probably don’t need to concern yourself with. But if you work part-time, it pays to keep tabs on the value of work credits.
Even if Social Security isn’t something you plan to collect for decades, it’s still important to keep up with changes to the program. Some of those changes might impact you immediately, even if you’re years away from leaving the workforce for good.
Plus, as mentioned, knowing how the program works could help you make smart decisions when you’re younger that lead to higher benefits. If you’re able to grow your job skills and snag a raise, for example, that could lead to more generous benefits down the line. And that’s something your future self will thank you for.
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