The Social Security Administration (SSA) is increasing its cost of living adjustment (COLA) for benefit checks in 2023, which is good news given the recent spike in inflation. It’s just one of many recent adjustments that Social Security has announced.
Here are some significant Social Security changes coming up in 2019 and what you need to be aware of.
In 2023, keep an eye out for these 5 changes to Social Security.
A Social Security benefit program is relied upon by more than 70 million individuals, so any annual adjustments to the program and its payouts are eagerly awaited. But in recent years, benefit checks that were significantly higher have been uncommon. In 2022, inflation is expected to skyrocket, making it harder for seniors and others to make ends meet.
1. A rise in the Cost of Living Adjustment (COLA)
According to the SSA, benefit checks will climb by 8.7 percent in 2023, which is a significant increase even compared to the already high adjustment of 5.9 percent for 2022. In actuality, the 2023 COLA is the largest increase since 1981 (11.2%).
Beginning in January, the 8.7 percent adjustment will result in a $146 rise in the average retired worker’s monthly Social Security income. In particular, the typical retirement check will rise from $1,681 to $1,827. When both members of a couple get benefits, the projected payout rises by $238, from $2,734 to $2,972.
For urban wage earners and clerical workers, the SSA has linked cost-of-living increases to the Consumer Price Index since 1975. (CPI-W). To calculate the COLA, the SSA compares the third-quarter CPI-W from the previous year to the third-quarter CPI-W from the current year. The COLA is then modified in accordance with the variation in CPI-W from one year to the next.
2. Increase in the maximum taxable income
The highest amount of income due to Social Security taxes in 2022 was $147,000. In other words, employees who pay into the system are taxed at a rate of 6.2 percent on wages up to this level. More of a worker’s salary will be liable to tax in 2023 since the maximum earnings will rise to $160,200. The increase in American average salaries is what led to this adjustment.
3. There are plans to enhance the maximum Social Security benefits.
In line with expectations, the maximum Social Security payout for an employee leaving at full retirement age will rise from $3,345 to $3,627 in 2023. This maximum applies to retirees who reach full retirement age, which is 67 for individuals who were born after 1960.
Because benefits are diminished when a person retires before reaching full retirement age, the maximum will differ for them. The same is true for those who choose to retire after reaching full retirement age, a move that will maximize your benefit payment.
4. The average benefit for disabled employees and spouses is also rising.
In 2023, the average benefit will rise across the board, including payments for the disabled, widows, and widowers. These numbers are broken out as follows:
According to the SSA, the average benefit for a widowed mother with two children will increase from $3,238 to $3,520.
Benefits for elderly widows and widowers who live alone will rise from $1,567 to $1,704.
The payment will rise from $2,407 to $2,616 for a disabled worker who has a spouse and one or more children.
Of course, these are averages, and situations will differ for each person.
5. Social Security modifies amounts exempt from the earnings test.
Social Security will withhold a portion of your payments if you apply for retirement benefits before reaching full retirement age if your income exceeds a specified level. It’s what the program refers to as the retirement earnings test exempt amounts, and if you’re still employed, it may take a sizable chunk out of your benefits. In 2023, it will operate as follows.
If you begin receiving Social Security benefits before reaching full retirement age, you have until 2023 to earn up to $1,770 per month ($21,240 annually) before the SSA begins deducting payments at a rate of $1 for every $2 over the cap. The maximum exempt income in 2022 was $1,630 per month ($19,560 year).
This regulation still applies in the year you reach full retirement age, but just for the month you reach full retirement age and with far more lenient conditions. Before benefits are deducted in 2023, you can make up to $4,710 per month ($56,520 annually), with $1 in benefits being deducted for every $3 over the limit (instead of every $2). The barrier was $4,330 per month ($51,960 annually) in 2022.
Bonus: Medicare premiums may occasionally be reduced.
The majority of retirees participate in both Social Security and Medicare, despite the fact that they are separate systems, and this nationalized healthcare system underwent a particularly significant alteration for 2023.
The cost of a monthly premium for Medicare Part B will drop from $170.10 in 2022 to $164.90 in 2023. The overall number of people enrolled in Medicare, according to the Centers for Medicare and Medicaid Services (CMS), was close to 64 million in October 2021.
To sum up
It is not unexpected that Social Security suffered one of its highest benefit changes ever given the enormous degree of inflation that the American economy has undergone over the past year. However, other program levels and criteria have also been modified to take into consideration the soaring inflation rate.