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How to Capitalize on the Biggest Increase in Your Social Security Check in 40 Years

2021-10-20T03:17:00.407Z


More than 70 million in the US will receive about $ 92 extra a month starting in December and January after the 5.9% increase in checks due to inflation. Here's what you need to know about this year's trim.


By Carmen Reinicke - 

CNBC + Acorns

People who receive social security benefits are about to see an increase in their checks.

The Social Security Administration reported last Wednesday that the amount paid will increase by 5.9%, according to the annual adjustment for inflation.

It is the largest increase in 40 years and is expected to help beneficiaries cover the rising costs of many basic products and services.

This means that

more than 70 million Americans will receive larger checks

.

The roughly 8 million beneficiaries of Supplemental Security Income (SSI) will get the increase as of December 30, while about 64 million who receive Social Security will see it in January.

The 2022 cost of living adjustment will add about $ 92 per month to an average retirement benefit of $ 1,565 per month, according to some estimates.

An Internal Revenue Service (IRS) building in Washington, DC, on October 15, 2021.Susan Walsh / AP

"The cost of living adjustment is an adjustment that is made automatically each year and is one of the most valuable features of Social Security," said Nancy Altman, president of

Social Security Works

, a group focused on expanding the benefits of social security.

Here's what beneficiaries should know about this year's adjustment.

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What actions should you take?

People who already receive Social Security benefits do not need to do anything else to get the increase;

checks will clear automatically.

However, before that happens, beneficiaries may want to take the opportunity to review their monthly budgets and see where they are going to use that extra money.

It's like when you work and get a raise. "

Diahann Lassus Financial Planner

"They really need to pay attention to the numbers and what that increase means to them, what it will mean for their monthly income," said financial planner Diahann Lassus, who is a director of

New Providence-based

company

Peapack Private Wealth Management.

New Jersey.

Having that extra money each month can help some people pay off their debts or put some of it into an emergency savings fund, he explained.

“It's like when you work and get a raise, are there other things that money can do for you?” Lassus said.

Inflation and Medicare will eat a part

Social Security recipients should understand that the increase they will receive was not intended as a way to increase their income or budgets, but rather so that they can keep their cost of living the same as inflation rises.

Today the prices of things like rent, gas, electricity and food have risen due to inflation.

Also, those who are enrolled in Medicare or Medicaid probably won't see the full 5.9% increase in premiums associated with health care, either.

In November, for example, there will be increases in Medicare Part B premiums by an estimated $ 10 per month, from 148.5 in 2021 to 158.5 in 2021.

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Generally, those payments are taken out of Social Security and can affect the adjustment.

However, a special rule called a liability waiver provision protects people from receiving lesser Social Security checks for Medicaid and Medicare discounts.

"You may not get much more because of the Medicare premiums," Altman said.

"You may not get much more because of Medicare premiums"

Nancy Altman, Social Security Works

After premiums are announced,

beneficiaries should receive a letter from the Social Security Administration

in December detailing how much their checks will be in 2022, he added.

Taxes can go up

If the social security check is your only source of income, as a rule there will be no change, according to Trenda Hackett, technical tax editor for the tax and accounting business at Thomson Reuters.

However, if you are someone who uses other retirement savings accounts in addition to Social Security or is working and receiving benefits, part of your checks may become taxable, depending on your outside income.

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"Taxpayers who receive other sources of income above the threshold amount, in addition to Social Security benefits, will have to pay more taxes if their income exceeds the base amount," explained Hackett.

To avoid surprises when it comes time to pay taxes, it may be a good idea to consult a tax advisor to find out how the adjustment will affect your taxable income.

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There may not be another great fit in a long time

Just because a record adjustment was made this year does not mean that Social Security enrollees should expect similar increases in the near future.

In fact, this large increase in 2022 could indicate that there will be no major adjustments in the next few years.

The last time there was a similar increase, of 5.8% in 2009, there were no further adjustments in the following two years.

"People shouldn't say, 'Well, this is going to happen every year," Altman explained.

This article is part of the

Invest in You

series 

.

Ready.

Set.

Grow

 (Invest in you: Ready. Done. Grow), an initiative of CNBC and Acorns, the microinvestment app.

NBC Universal and Comcast Ventures are

Acorns

investors 

.

Source: telemundo

All news articles on 2021-10-20

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