If you’ve been following the news, you may know that inflation is up, gas prices are skyrocketing, and the stock market is stuck in a steady decline. But how up to date are you on Social Security?
If you’re not yet of an age where you’re collecting benefits, Social Security may not be on your radar, and understandably so. However, it is important to be aware of the program.
For one thing, those perks could end up being a major source of income for you eventually. And also, the moves you make during your working years could set you up for higher profits in the future.
Plus, even if you’re not currently collecting Social Security, if you’re making money, you’re paying taxes to fund it. And that’s why it’s important to understand what those taxes look like. With that in mind, here are some recent changes to Social Security that you may not know about.
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1. Profits got a 5.9% increase
Why should it matter what increase Social Security received this year if you’re not yet receiving benefits? That is, because you should know that the 5.9% was the program’s biggest increase 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 your own savings rather than planning to draw on those benefits in the future. Chances are they don’t do a good enough job of covering the costs of living for seniors, not even close.
2. The salary cap increased
Social Security gets most of its income from payroll taxes. But workers don’t pay those taxes on all of their earnings. Instead, an annual limit is set.
Last year, wages up to $142,800 were subject to Social Security taxes. This year, that limit has increased to $147,000. If you earn more and aren’t sure why your paychecks have shrunk, this could be your answer.
3. The value of work credits increased
Being able to collect Social Security in retirement is not a given. To qualify for benefits, you’ll need to earn enough money to earn 40 lifetime work credits.
The value of a work credit changes from year to year and you can earn up to four work credits a year. Last year, a single work credit was worth $1,470 in earnings. This year, you’ll need $1,510 in earnings to get a work credit.
If you have a full-time job, work credits are something you probably don’t need to worry about. But if you work part-time, it’s worth keeping an eye on the value of work credits.
Even if Social Security isn’t something you plan to collect for decades, it’s important to keep up with changes to the program. Some of those changes can hit you right away, even if you’re years away from leaving the workforce for good.
Also, as mentioned, knowing how the program works could help you make smart decisions when you’re younger that lead to higher benefits. If you can increase your job skills and get a raise, for example, that could lead to more generous benefits in the future. And that is something your future self will thank you for.
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