In 2023, There Will Be Three Major Social Security Changes, Some Beneficial and Some Negative
As millions of Americans make plans for self-improvement for the next year, the federal government’s main social welfare safety net will be changing as well.
The news is generally good for individuals who are already benefiting from the program. Additional payments will assist recipients to keep up with rising prices for food, petrol, and other necessities.
But what about those who are still paying their taxes? The modifications may be unwelcome. Here’s what they’ll mean for you, whether you’re already retired or decades away.
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Let’s Receive a COLA (Cost of Living Adjustment)
The 8.7% cost of living increase, or COLA, will be the most significant change in 2023. For example, if you earn $2,000 per month from Social Security, your monthly payment will increase to $2,174.
The 2023 COLA represents the largest percentage increase since 1981’s 11.2% increase, and it is linked to the blazing inflationary pressures that have driven up daily prices for every American.
Wait the Maximum Amount of Time and Receive the Maximum Amount of Money
This year, the government intends to reward Americans who wait until they reach the full retirement age (FRA) of 67 before filing for benefits.
Beneficiaries who did not wait until the FRA will see their monthly checks increase by around $140 next year.
Those who wait until they are 67 to receive their benefits would see their monthly checks increase by $282 to $3,627.
The Social Security Administration has linked rises in the cost of living to the Consumer Price Index. So, while the large COLA was unavoidable, it is nonetheless welcome.
However, keep in mind that these increases are unlikely to help recipients recover the additional costs incurred in 2022.
While inflation has slowed in recent weeks, it remains strong enough that the Federal Reserve intends to raise interest rates until 2023.
Higher-income Earners Will Pay More
Now for some mixed news (depending on your income bracket.) Because Social Security is funded mostly by payroll taxes, the program will dig deeper into the paychecks of high-income taxpayers.
The maximum earnings subject to Social Security taxes before 2023 were $147,000.
Employees earning more than $160,200 will have to pay taxes on an additional $13,200 of income beginning next year.
The Full Retirement Age Remains Constant
The system continues to reward patience when it comes to Social Security. The full retirement age of 67 will remain unchanged next year.
And the modifications to the maximum payment occurring on the elder end of the recipient age spectrum simply serve to reinforce the importance of deferring Social Security until you absolutely need it.
While seniors can begin receiving Social Security payments at the age of 62, postponing will earn you more money each month.
Simply deferring your claim until you reach the age of 67 can earn you a delayed retirement credit of up to 8% of your annual benefits on top of the maximum benefit amount.
Remember to look for spousal and survivor benefits, such as present married couples collecting the lowest earner’s benefits first and deferring the highest earner’s benefits.
The AARP Social Security Resource Center is a great place to learn about Social Security timeframes.