When it comes to financial support for older Americans, Social Security plays a vital role. Tens of millions of people receive regular monthly checks as part of the program, so there are many for whom financial planning for retirement would look much different without Social Security.
As the year draws to a close, Social Security recipients should be prepared for some big changes to the program. Some of these are undoubtedly positive, while others may have a greater impact on your finances. Read on to learn more about these facts about Social Security in 2023.
1. Seniors will receive an 8.7% cost of living adjustment
One of the key aspects of Social Security is that it adjusts its costs for inflation each year. The cost of living adjustment amount, or COLA for short, changes every year based on numbers from the Consumer Price Index. Seniors will receive higher salaries in January.
The Social Security Administration provided information on how much of an impact the COLA will have on regular members. After the COLA goes into effect, the average benefit for all retirees will increase by $146 to $1,827 per month. For couples with both spouses receiving benefits, an average COLA increase of $238 to $2,972, while for widowed parents with two children, it could increase by $282 to $3,520. For a surviving spouse without children, the benefit could increase by $137 to $1,704 per month.
The 8.7% COLA will be the largest in more than 40 years, reflecting the recent high inflation. As a result, seniors will be happy to see an increase, but it only begins to offset the higher costs they have paid in 2022.
2. The maximum social security benefit is increasing
Those retiring in 2023 will be able to earn a higher maximum Social Security benefit than those retiring in 2022. Those who retire at the earliest eligible age of 62 will receive maximum benefits of $2,572 per month, up $208 from 2022.
For others, their benefits will depend on when they retire. The biggest increase will be available to those who wait until age 70 to retire in 2023, with maximum increases ranging from $361 to $4,555 a month. Those retiring at age 65 will see a maximum increase of $286 to $3,279, while those retiring at age 66 and 67 will see increases of $266 and $240, respectively.
3. Payroll taxes for social security will increase for high earners
Social Security gets most of its money from payroll taxes, and there will be a big jump in the maximum tax per worker in 2023. The wage base determines the maximum amount of income from which the government collects payroll taxes, and that number. Got a $13,200 increase to $160,200 in 2023.
The net result is that workers earning more than $160,200 will have an additional $818.20 deducted from their wages in 2023. Self-employed individuals may have to pay double the additional tax amount, or $1,636.40. For most workers, however, the change won’t matter because only a small percentage of Americans earn nearly the $160,200 maximum base salary.
One thing remains constant – finally
Next year will also put an end to a long series of changes that have generally resulted in lower benefits for older Americans. The full retirement age (FRA) is slowly rising, but it reached 67 years for those born in 1960 or later. As a result, those who apply for early benefits at age 62 in 2023 will have the same FRA in 2022 as their year-older peers in 2022. However, their age 62 benefits will still have a 30% haircut compared to what they receive. they would receive if they waited to claim their FRA five years later.
Knowing the latest Social Security changes can ensure you get every penny you get. For the most part, seniors will appreciate what changes to the program in 2023, but you’ll want to track your Social Security payment to make sure you understand all you can about your hard-earned benefits.
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