As we enter 2023, it’s essential for current and future Social Security beneficiaries to stay informed about the changes that will impact their benefits. This year brings a mix of updates, including a significant cost of living adjustment, increased benefits for those who delay claiming, and changes to the earnings limits and qualifications for benefits. In this article, we will explore the major Social Security changes in 2023, helping you better understand how these changes may affect your financial planning and retirement strategy.
7 Major Social Security Changes In 2023
Here are the 7 major changes to Social Security benefits in 2023.
Significant Cost of Living Adjustment (COLA)
In 2023, Social Security beneficiaries will see an 8.7% cost of living adjustment, the highest increase since 1981.
For example, a $2,000 monthly benefit will rise to $2,174.
The COLA is tied to the Consumer Price Index and is meant to help offset inflationary pressures.
Increased Benefits for Delayed Claims
The government rewards those who wait until their full retirement age (FRA) of 67 to claim benefits.
Beneficiaries who didn’t wait will see their checks increase by about $140 per month, while those who wait until 67 will see a $282 increase, bringing their monthly checks to $3,627.
Higher Payroll Taxes for Higher Earners
Social Security primarily derives its funding from payroll taxes.
In 2023, the maximum earnings subject to Social Security taxes have increased from $147,000 to $160,200.
This means employees earning over $160,200 will pay taxes on an additional $13,200 of income.
The full Retirement Age Remains the Same
The full retirement age of 67 remains unchanged in 2023.
Delaying benefit claims until 67 can earn a delayed retirement credit of up to 8% of yearly benefits, in addition to the maximum benefit amount.
It’s also crucial to explore spousal and survivor options, such as married couples claiming the lower earner’s benefits first while delaying the higher earner’s benefits.
No Medicare Premium Offset
In 2022, a 5.9% COLA increased the average retirement benefit by $92 a month, but higher Medicare Part B premiums offset this for many enrollees.
In 2023, the standard Part B premium decreases from $170.10 to $164.90, leaving beneficiaries with some extra money in their monthly Social Security deposits.
Updated Social Security Earnings Limits
Beneficiaries who have not yet reached full retirement age and continue to work may have their benefits temporarily withheld if their earnings exceed certain limits.
In 2023, the threshold is $21,240 for beneficiaries who will reach FRA later (up from $19,560 in 2022).
The SSA withholds $1 for every $2 earned above this limit.
For those reaching FRA in 2023, $1 is withheld for every $3 earned above $56,520 (up from $51,960 in 2022) until the FRA month.
After that, there are no deductions, and the SSA adjusts benefits upward to recoup prior withholdings.
Changes in Qualifying for Benefits
Eligibility for benefits is based on Social Security credits earned through covered work where Social Security taxes are paid.
In 2023, one credit is earned for every $1,640 in earnings (up from $1,510 in 2022), with a maximum of four credits ($6,560) per year.
Retirement benefits require 40 credits (10 years of covered work), while SSDI requires between 6 and 40 credits depending on the age of disability onset.
7 Major Social Security Changes In 2023 Summary
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