What is Social Security?

Social Security is a federal program designed to provide retirement benefits and disability income, and survivors’ benefits to qualified persons, their spouses, children, and survivors.  
 
The program is the primary source of income for most elderly individuals. Nearly nine out of 10 individuals aged 65 and older receive Social Security benefits, and the program covers an estimated 178 million workers. 
 
Yet, Social Security also provides much more than just retirement benefits. While retired workers and their dependents account for 75% of total benefits paid, disabled workers and dependents also account for 15% of total benefits paid, with survivors of deceased workers accounting for about 9%.  
 
Full retirement age, or the age at which you can start receiving your full retirement benefit amount, varies based on when you were born. The age for full retirement benefits is 66 if you were born between 1943 and 1954, but it increases gradually to 67 from 1955 to 1960, after which it remains 67 for anyone born after 1960.  
 
In 2022, you are eligible for full Social Security benefits if you were born any time before September 2nd, 1956.  
 
To determine your full retirement age, consult this chart: 

Year of Birth  Full Retirement Age 
1943 – 1954  66 
1955  66 and 2 months 
1956  66 and 4 months 
1957  66 and 6 months 
1958  66 and 8 months 
1959  66 and 10 months 
1960 or later  67  

You may also choose to delay receiving benefits or begin receiving benefits as early as age 62.  
 
If you delay receiving benefits beyond your full retirement age, your benefits will increase by a certain percentage, depending on the year you were born. The increase will apply automatically from the time you reach full retirement age until you start taking benefits or reach age 70, whichever comes first.  
 
Conversely, if you start your benefits early, your benefits will reduce by approximately one-half of 1% for each month you start your Social Security before your full retirement age. 

Qualifying for Social Security

When you work in a job and pay Social Security taxes, you are actually investing in your future by earning credits, based on the amount of your earnings, which will qualify you to receive Social Security benefits later in life. The SSA uses your work history to determine your eligibility for retirement or disability benefits, or your family’s eligibility for survivor’s benefits when you die.  
 
As average earning levels increase each year, the amount of earnings needed per credit goes up slightly. In 2022, you receive one credit for each $1,510 of earnings, up to the maximum of four credits per year.  
 
Additionally, the number of credits you need to be eligible for benefits depends on your age and the type of benefit; anyone born in 1929 or later needs 10 years of work (40 credits) to be eligible for retirement benefits, while people born before 1929 need fewer years of work. 
 
When a person who has worked and paid Social Security taxes passes away, certain family members may be eligible for survivor’s benefits. Depending on the person’s age at the time of death, eligibility may be contingent upon whether the deceased person worked for up to ten years. 


Survivors of very young workers might be eligible if the deceased worker was employed for 1½ years during the three years before their death. 

Social Security COLA Increase

One of the most significant changes to Social Security in 2022 comes in the form of the most significant cost-of-living adjustment (COLA) since 1983, resulting from rising prices.  
 
The SSA announced in November of 2021 that the 2022 Social Security COLA would be set at 5.9%. Essentially, this adjustment attempts to ensure that the purchasing power of Social Security benefits is not eroded by inflation. In practice, it results in a boost to the amount of the monthly benefits for Social Security recipients.  
 
However, this increase is somewhat offset by a concurrent increase in Medicare Part B premiums, and certain high-income retirees may also be subject to Medicare surcharges.
 
So what does that mean? For some beneficiaries, the cost of Medicare may outpace the Social Security COLA, resulting in a situation where their benefits may technically be higher than last year, but their payments may be lower.  

Who gets Medicare?

Medicare is our country’s health insurance program for people aged 65 or older, people under age 65 with specific disabilities, or people of any age with a qualifying medical condition.  
 
A portion of the payroll taxes paid by workers and their employers provides financing for Medicare and monthly premiums deducted from Social Security checks. 
 
The Social Security credits you earn also count toward eligibility for Medicare when you reach age 65. You may be eligible for Medicare at an earlier age if you get disability benefits for 24 months or more.  
 
Finally, your dependents or survivors also may be eligible for Medicare at age 65 or earlier if they have a disability.  

Medicare vs. Medicaid

Medicare and Medicaid may have similar names, and they are both health insurance programs. Still, they are, in fact, two separate programs, funded and operated by different parts of the government and serving separate groups for the most part.  
 
In a broad sense, the distinction between Medicare and Medicaid is straightforward: Medicare provides healthcare coverage to those 65 or older or those who have a disability, regardless of income, whereas Medicaid serves those who have a very low income.  
 
Some people are dually eligible and receive benefits from both Medicare and Medicaid. However, the missions of the two programs are not the same.

What to Expect Next Year

In 2022, record-high inflation is outpacing the aforementioned 5.9% COLA increase. That means that despite the adjustment, Social Security benefits are losing purchasing power. 
 
Looking ahead to 2023, sustained inflation will likely lead to an even more significant cost-of-living adjustment next year. But, as 2022 has demonstrated, COLA increases are not always effective at keeping up with runaway inflation.  
 
If, on the other hand, inflation subsides before 2023 (as some experts believe it will), the purchasing power of benefits would moderate, and the 2023 COLA would likely reduce.  
 
On an individual level, the impact of these potential changes may depend significantly upon the actual cost of living and Medicare costs.  
 
Other legislation and budget proposals are currently being debated in the United States Congress and could bring further changes to Social Security. For example, one proposal would aim to boost benefits, while the President’s proposed 2023 budget would include new funding to improve the agency’s services and make benefits more readily available.  
 
Of course, all of this is subject to change, so keep checking back for updates.  

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