7 Ways the Social Security System Will Change in 2023

Retirement age man
diploma / Shutterstock.com

Social Security recipients likely already know that their benefits increase almost every year to counteract the effects of inflation. But the cost of living adjustment is just one of several annual changes to the Social Security system.

This increase affects people who are retired as well as those who are not retired.

Here is what will change for 2023.

1. Official website

Social Security website
Casimiro EN / Shutterstock.com

The Social Security Administration recently announced an overhaul of its website, which is used by more than 180 million people each year. The improvements are part of an effort to reduce the number of calls and in-person visits to the local Social Security office.

To learn more about how much you can do without calling or visiting your local office, see “7 Benefits of Having an Online Social Security Account.”

2. Benefits increase

Happy senior riding a bicycle
Jenny Sturm/Shutterstock.com

Social Security recipients will see their monthly benefit payments increase by 8.7% in 2023, as we explain in “Social Security Payouts Soar in 2023.”

The adjusted cost of living (COLA) means an additional $146 per month, based on the average Social Security payment for retired workers.

However, for some, the extra income can be offset by higher taxes.

3. Medicare premium reimbursement

Social Security card

Premiums for Medicare Part B health insurance are deducted from many retirees’ Social Security payments. And annual COLA increases in Social Security payments are usually offset by annual increases in Part B premiums.

In 2022, for example, Social Security retirement benefits have increased on average by about $92 per month, but the typical Part B premium has also increased, by $21.60. So, the impact of Social Security’s COLA diminishes: The average retiree actually receives only about $70 more in benefits each month if their Part B premium is deducted from their Social Security payment.

For 2023, on the other hand, Part B’s typical premium is down by around $5. So, the increase in Social Security COLA will not be offset by the increase in Part B premiums.

4. Income limit for working retirees

Older woman working remotely
DisobeyArt / Shutterstock.com

If you are claiming Social Security retirement benefits before reach your full retirement age and also continue to work, the Social Security Administration will withhold part of your benefits if your income exceeds the income limit. (There is no penalty for earnings generated while working after You reach full retirement age.)

This income threshold generally increases every year in line with the increase in the national average wage index. For 2023, it will increase:

  • From $19,560 to $21,240 if you’re about to reach full retirement age after 2023
  • From $51,960 to $56,520 if you’re about to reach full retirement age in 2023

However, the Social Security Administration notes that you do not lose any retained benefits if your income exceeds the applicable income limit. Once you reach full retirement age, your monthly benefit is permanently increased to account for the months in which it is withheld.

5. Tax limits on workers’ income

A man delivers groceries orders
Hananeko_Studio / Shutterstock.com

Here’s another annual adjustment based on average wage increases: The maximum amount of workers’ earnings subject to Social Security payroll tax will increase from $147,000 in 2022 to $160,200 in 2023.

So if you’re lucky enough to earn more than $160,200 in 2023, you won’t owe Social Security payroll taxes on every dollar you make.

Social Security payroll tax rates themselves will remain the same in 2024: 6.2% for employees (employers pay another 6.2% on behalf of their employees) and 12.4% for the self-employed.

6. Income required for one credit

Office workers
CRATISTA / Shutterstock.com

Not everyone is entitled to Social Security retirement benefits. As we explained in “6 Groups Who Cannot Rely on Social Security Benefits“:

“To receive Social Security retirement benefits, most people need to accumulate at least 40 ‘credits’ over the course of their working lives, according to the US Social Security Administration (SSA). Currently, you can earn up to four credits per year if you work and pay Social Security taxes.”

The income you need to receive one Social Security credit, also known as quarter coverage, will increase from $1,510 in 2022 to $1,640 in 2023.

7. Maximum benefits

seniors eat
Monkey Business Images / Shutterstock.com

There is a limit to how much money a retiree can receive in monthly benefits. This is known as the maximum Social Security benefit.

Your maximum Social Security benefit depends on your retirement age. The maximum benefit for someone retiring at full retirement age will increase from $3,345 per month in 2022 to $3,627 per month in 2023.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *