What is the Social Security Cap?

The Social Security Administration released several figures pertinent to both workers and retirees.

How much is the social security cap?

These statistics reveal a large increase in the worker wage base and a modest boost to retirement benefits.

These figures demonstrate the continuing strength of the US economy. But the social security cap will be changing as a result.

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What is the Social Security Cap?

The social security cap of $142,800 for 2021 will rise by 3.6% in 2022 to $147,700. This is the amount of earnings subject to the Social Security tax.

This will mean a bigger tax bill for high-income workers at the end of the year.

The reason for the increase is the growth in wages. So now, the maximum tax for all workers will be $18,220.

The maximum that can be withheld from a paycheck in 2021 will be $8,537.40. So both employers and employees pay half the total Social Security tax.

Why It’s Good News for Retirees?

The cost-of-living adjustment (COLA) is the key figure for retirees to look out for. 63 million retirees will receive a 1.3% COLA increase in 2021.

So in 2021, this will mean the average benefit rises by $1,503 per year. So a retired couple will see an increase of $2,531 per year in benefit payments.

More than 64 million recipients will get a 5.9% boost in 2022, compared to a 1.3% Cola in 2021.

That means the average Social Security benefit for a retired worker will rise by $92 a month, to $1,657, in 2022, while the average benefit for a retired couple will grow by $154 a month to $2,753.

However, retirees need to keep in mind that premiums on Part B and Part D Medicare will also increase. For now, though, the official numbers haven’t been released, so we don’t know how significant this will be.

What About Earnings Limits for Workers Under Full Retirement Age?

Recipients under the age of 66 will see their benefits docked by $1 for every $2 in earnings above the maximum rate limit of $1,530 per month.

Any worker who turns 66 in 2021 can earn $4,050 per month before their birthday without having their benefits docked.

But anything above this limit means they will lose $1 in benefits for every $3 they earn. These limits don’t apply to those who have reached full retirement age.