Social Safety’s full retirement age will peak at age 67 in 2022 for anybody born in 1960 or later.
3. Excessive earners can anticipate to pay extra taxes
Remember that modifications to the Social Safety program do not simply have an effect on individuals presently receiving advantages. One of many greatest updates subsequent 12 months is a rise to the payroll tax earnings cap.
The payroll tax is Social Safety’s workhorse. In 2019, it generated $944.5 billion of the $1.06 trillion collected by this system. Income is introduced in by making use of a 12.4% tax on earned income (wages and wage, however not funding earnings) ranging between $0.01 and $137,700, as of 2020. Be aware, all earned earnings above $137,700 in 2020 is exempt from the payroll tax.
In 2021, all earned earnings as much as $142,800 will likely be taxable, representing a rise of $5,100. For the roughly 6% of staff who’re anticipated to hit this cover, we’re speaking about a rise in payroll tax of as much as $632.40 subsequent 12 months.
In the event you’re questioning how the SSA got here up with $142,800 as subsequent 12 months’s cap, it has to do with the year-over-year improve within the Nationwide Common Wage Index (NAWI). Between 2018 and 2019, the NAWI rose from $52,145.80 to $54,099.99 — a achieve of three.74%, or 3.7% when rounded to the closest tenth of a p.c. Subsequent 12 months’s tax cap is 3.7% larger than the $137,700 in 2020. It is that easy.