What Changes Are Coming to Social Security in 2023?
If you’re heading into retirement, there are some essential things you need to know about Social Security benefits. Here are eight significant changes coming to Social Security in 2023.
1. Social Security and Supplemental Security Income (SSI) Increase
Social Security and SSI for about 70 million Americans are set to increase by about 8.7% in 2023. The increase is an 8.7% cost-of-living adjustment (COLA) or about $140 per month. This COLA is a significant jump from 2021, when the adjustment was only 5.9%. It is the highest COLA since July 1981 and has been made to match inflation.
SSI beneficiaries will see the standard individual monthly payment increase to $914 in 2023, which is about $73 higher than in 2022.
2. High-Earning Workers Have More Taxable Income
The maximum income that can be taxed will increase to $160,200 and will be taxed at 7.65%. As a result, high-earning workers will have more taxable income in 2023. About 6% of workers make more than $147,000, meaning these individuals could see up to $1,636.80 added to their payroll tax liability in 2023.
3. Higher Social Security Maximum Payout
The maximum benefit for people who retire at full retirement age and were high earners throughout their lives will go up to $3,627 per month, an increase of $282. Reaching the maximum payout for Social Security is dependent on these criteria:
- You must reach or surpass the cap for maximum taxable earnings for the 35 years the Social Security Administration considers.
- You must wait until your full retirement age to take benefits.
- You must work for a minimum of 35 years because the Social Security Administration will take into account your 35 inflation-adjusted, highest-earning years to calculate monthly retirement benefits.
About 2% of workers will receive the maximum payout.
4. Early Filers Will Have Increased Withholding Thresholds
Anyone who retires before full retirement age will experience several penalties on their Social Security. Permanent lower monthly payouts apply for any early filer, and you might have to get the retirement earnings test. This test lets the Social Security Administration withhold all or some of the recipient’s payout if the individual earns more than the preset income thresholds.
In 2023, the income thresholds will increase, so early filers will get a larger amount of earned income without having as many or any benefits withheld. Next year, any early filer can earn up to $21,240 a year without withholding. If you earn above this amount, your benefits will be withheld at a rate of $1 for every $2 above the limit you are.
An early filer who reaches full retirement age can get up to $56,520 a year before withholding. These people will see a rate of $1 withheld for every $3 above the threshold. Additionally, the retirement earnings test no longer applies when a beneficiary finally reaches full retirement.
5. Disability and Spousal Income Thresholds Increase
Millions of people receive disability benefits. Non-blind disabled workers can generate $1,470 in monthly income before losing benefits in 2023. Blind, disabled workers will also see an increase in 2023, with the earnings cap going up to $2,460 a month.
Any widows with two children will also see an increase in benefits, going from $3,238 to $3,520. Widows living alone or aged will go from $1,567 to $1,704 in 2023.
6. Higher Earnings Needed to Benefit
People need to get work credits to qualify for disability and survivor coverage and retirement benefits. You need at least 40 lifetime work credits to earn Social Security, and you can earn four per year. The qualifications for these benefits are increasing this year — you will need to make $1,640 to get a quarter of coverage. You will need to earn $6,560 in 2023 to get all four credits.
7. Higher Maximum Benefits for Social Security
The maximum benefits for anyone retiring at full retirement age in 2023 will go from $3,345 to $3,627. This maximum only applies to those at full retirement age, which is 67 for people born later than 1960. The maximum benefits will be different for people who retire early to late.
8. Potentially Lower Medicare Premiums
While Medicare is not a part of Social Security, it affects your finances, so it is worth mentioning on this list. Many retirees have their Medicare premiums withheld from Social Security payments, making them uniquely intertwined with each other.
There is a significant change coming in 2023 for people who use Medicare — there will be a decrease in monthly Medicare Part B Premiums. In 2022, the number was $170.10, while in 2023, it will be $164.90.
Learn More About Social Security Changes With Fort Pitt Capital Group
Social Security changes in 2023 are relatively significant and will affect people across the spectrum. If you’re curious about how these benefits will apply to you or what steps you need to take, Fort Pitt Capital Group is prepared to help! Learn more about our individual services or schedule a consultation today!