Social Security Benefits to Increase in 2022

Social Security Increases and Retirement Planning in 2022

We’ve talked earlier this year about policy changes, inflation, and how it’s impacting Baby Boomers who are either approaching or already in retirement. And while we’re not saying the U.S. government reads our blog… some of their latest moves do align with the insights we’ve previously discussed.

The Social Security Administration recently announced that seniors will see their benefits increase by 5.9% in 2022, thanks to Cost of Living Adjustments (COLA). This is the largest increase since 1982 and is designed to help offset inflation and the rising cost of living measured by the Consumer Price Index.

Let’s break down what that means, and why a Social Security increase is only part of a complete retirement plan.

Social Security: A Pillar, Not the Whole Structure

Social Security is a foundational piece of retirement income for most Americans — nearly 9 in 10 people over 65 receive it.

Here’s how it works:

• You pay 6.2% of your income into Social Security during your working years, and your employer matches it. If you're self-employed, you pay the full 12.4%.

• You can start collecting as early as age 62, but if you delay benefits, your payout increases — up to age 70.

While that sounds helpful, Social Security is not meant to fully cover retirement costs. It typically accounts for just 30–40% of your retirement income. And there's more: unless Congress takes action, the Social Security Trust Fund will be depleted by 2033, which would reduce future payouts by roughly 25% based on current estimates. Learn more from the official SSA announcement.

The takeaway? You need additional strategies and income sources beyond Social Security to retire comfortably.

Retirement Planning Basics

A solid retirement plan involves far more than just counting on monthly benefits. Here are some foundational steps:

1. Determine Your Time Horizon

When do you want to retire? The answer affects how much time you have to save and how aggressively you should invest. Those with 20+ years can likely afford more growth-focused strategies. If retirement is close, capital preservation becomes a higher priority.

Read more on aligning retirement timelines with inflation risks.

2. Estimate Your Future Expenses

Many assume they’ll spend less in retirement. But depending on your goals — travel, gifts, family support, or giving back — your spending could remain the same or even increase. Plan based on realistic projections, including rising healthcare and housing costs.

3. Calculate After-Tax Returns

Not all of your investments and income will be tax-free. Be sure to assess after-tax returns to see how much money you’ll actually have available each year. This also helps determine which retirement accounts (Roth vs. traditional IRA, for example) make the most sense for you.

Here’s a simple 5-step guide to retirement planning to use as a starting point.

4. Incorporate Estate and Succession Planning

Planning for retirement also means preparing for the future of your assets and your loved ones. Whether it’s a will, trust, or business succession plan, these documents are vital. Retirement isn’t just about enjoying life — it’s about protecting what you’ve built.

Personal Risk Tolerance Matters, Too

Your ideal retirement plan depends not only on your goals and timeframe, but also on your risk tolerance. Some people can stomach more market volatility than others. If you haven’t assessed your personal comfort with risk, now’s a great time to do so.

Use our guide to determine your risk tolerance — it’s one of the most important (and overlooked) steps in smart long-term planning.

Build a Plan That’s Bigger Than Benefits

We believe retirement should feel empowering, not uncertain. At NEST, our planning process is tailored to your life, your goals, and your money — from IRAs to 401(k)s, to inflation impact and tax strategies.

Whether you're years from retirement or preparing to transition now, let’s make sure your financial foundation is built to last.

Reach out at info@nestfinancial.net to get started.

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DISCLAIMER: This article is for educational purposes only and does not constitute financial or investment advice. For personalized guidance, email info@nestfinancial.net.