Forbes- Jan 10, 2022

Income is taxed at the federal, state, and local levels, and earned income is subject to additional levies to fund Social Security and Medicare, to name a few. Taxes are difficult to avoid, but there are many strategies to help ward them off. Here are six ways to protect your income from taxes.

Here are some highlights of the most impactful changes Social Security filers face in 2022 and beyond:

  • If you are already receiving Social Security benefits, you will receive a 5.9% COLA increase to your monthly Social Security benefit. This nice increase will be somewhat offset by the increase in Part B premiums
  • To earn the maximum of 4 credits in 2022, you need to earn $6,040 or $1,510 per quarter
  • Maximum taxable wage base is $147,000
  • If you turn 62 in 2022, your full retirement age to 67
  • If you turn 62 in 2022 and claim benefits, your monthly benefit will be reduced by 30% of your full retirement age benefit
  • If you choose to work before you reach full retirement age, and you are collecting benefits, the annual earnings limitation is $19,560. In the year you reach full retirement age, that threshold is $51,960 in 2022. At full retirement age, this limitation goes away!
  • The maximum Windfall Elimination Provision (WEP) deduction for 2022 is $512
  • If you are signing up for Social Security in 2022, be mindful that additional planning may be needed if you have an HSA

If you haven’t already done this, create your own “my Social Security account” at This allows you to review your earnings history and determine an estimate of your projected future benefit. The closer you are to retirement the more accurate the projected benefit is. If you do not do this and reach age 60, you will receive a benefit statement by mail yearly.

Here are some highlights of the most impactful changes Medicare in 2022:

  • Medicare Part B premium is going up by $21.60 to $170.10
  • The annual deductible for all Medicare Part B beneficiaries is $233 in 2022, an increase of $30 from the annual deductible of $203 in 2021

Since Social Security has some social elements to it, the higher your income, the more you will pay for Medicare. It’s called the “Income-Related Monthly Adjustment Amount” or IRMAA. The IRMAA adjustment which is recalculated annually, affects Medicare Part B and D, and is based on income from your income tax returns two years earlier. The 2022 adjustment is based on your 2020 income tax return. The threshold when IRMAA comes into play for 2022 is $91,000 for single individuals and $182,000 for a married couple. It’s calculated on what’s called “Modified Adjusted Gross Income” which is Medicare specific. You can appeal the IRMAA adjustment if you have had a “life-changing event” as defined by the Social Security Administration.

We have all read the stories about the viability of Social Security. Social Security will not go broke. By law, Social Security can only pay out that which it collects and/or from existing reserves. The reserves that were built up over many, many years because there were more people contributing than collecting Social Security are being spent now to pay current benefits. The reserve will be depleted by 2033-2034. Lacking any reforms, current law dictates a 24% cut in benefits, for everyone. Aging Baby Boomers, life expectancy increasing and fewer people contributing into the system all contribute to Social Security’s woes. Most pundits say that Congress will make the necessary reforms. We’ve all read for quite a while now that Congress needs to make these reforms sooner rather than later. Since Social Security is the largest mandatory spending item for the federal government you would think this reform would take greater precedent. The longer this rhetoric drones on, the more skeptical I become. For me, I plan on the 24% cut. If Congress does fix the problems, well that’s icing on the cake, and I won’t be disappointed.

In addition to reforms needed to shore up Social Security for the future, there lately seems to be more talk about changing or eliminating the Windfall Elimination Provision (WEP). This is not a new initiative; it’s just getting more attention now.

This article deals with the changes for 2022. While most people file at age 62, and the latest filing date is age 70, you have an 8-year time frame to file for Social Security benefits. A longer life expectancy usually translates into a longer retirement. There are good and bad reasons to file early or later. There are no rules of thumb to determine the best claiming strategy. You only have one opportunity to make the right decision for you and your spouse (if you have one). Social Security benefits usually replace about 40% of your pre-retirement income. Don’t make your filing date based on emotion. If your cash flow is good and you have a spouse, you may be affected by the WEP or Government Pension Offset (GPO), your health is good and you may decide to work until your full retirement age, contact an expert on preparing various claiming strategies for you to review. You may be pleasantly surprised to find that the best strategy for you will increase your total lifetime benefits by as much as $200,000.

By Tom R. Hager, Contributor

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