Seniors are excited as 2022 gets closer, thanks to an increase in monthly payments.
While the COLA increase was 5.9%, this doesn’t necessarily equate to more money in their bank accounts after they get their payment.
Adjustments are made, known as cost-of-living-adjustments, or COLA, by the Social Security Administration to help seniors manage inflation.
With rising costs, it’s hard to keep up on a fixed income. Every year the SSA determines how much more seniors would need to maintain their lives.
The issue is, you may end up paying taxes on part of your benefits once you pass a certain threshold.
Benefits between 50% and 85% could be subject to tax, and these income thresholds haven’t changed in decades despite inflation.
Taxable income levels for Social Security benefits doesn’t change despite inflation
The taxable income levels for Social Security benefits to be taxed has never changed, yet the amount they receive changes based on the value of money fluctuating.
To change this, Congress would need to change the law and raise the income limits for when benefits can become taxable.
Benefits only became taxable in 1984, and the income threshold limits set that year are the same in 2021.
Only 10% of beneficiaries owed the IRS in 1984.
As COLA increases, the income limits just remain the same.
While it’s great that seniors can expect a bigger payment every month in 2022, they should be aware of what their tax threshold is.
Should they pass it, they may want to save for a tax bill in 2023.
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