Changes coming to Social Security Income in 2023: Everything you need to know
These are important changes and we've listed them all for you to know and be aware of.
The social security program is one of the major retirement programs in the United States. It plays an important role in the budget of millions of seniors nationwide.
Although this system wasn’t made to sustain people, especially those who don’t have others sources of income in their elderly age, the social security program helps many Americans to cover their bills.
Because of how important the social security program is not only for those who already retired but for those who are retiring in 2023, it’s very important to keep an eye on the changes for the upcoming year.
Despite the fact that this is the first time, in 7 years, that the social security full retirement age won’t change, there are other important factors to look out for in the next year.
1- An incredible high cost-of-living adjustment
The cost-of-living adjustment, or COLA for some people, is one of the major responsible for the Social Security Income raises every year.
COLA’s most important role is to keep the Social Security above or, at least, on par with the inflation that rises every year. This means that, if the price of services and goods rises every once in a while, COLA makes sure that the Social Security Income keeps pace with it.
In 2022 particularly, inflation is rising pretty high. Predictions so far indicate that Cost-of-living adjustments will make 8.6%.
Even if we only discover the real COLA in October, if this prediction proves right, workers will have an increase of 145 dollars monthly. It’s the biggest increase year-over-year in the last 41 years.
But this by no means indicates a good thing. Most of this increase will be swallowed by the inflation that comes rampant this year.
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2- Workers with bigger incomes will most likely have to open their wallets next year.
For those who don’t know, most of the money that funds the Social Security Programs comes from a payroll tax most workers pay every year.
If you’re self-employed, this tax is 12.4% on your earned income (salary and wages, but not investment income). If you work on another person’s business, you and your boss split that responsibility in half (6.2% for every part)
The thing is that the only people who pay these payroll taxes are those whose earned incomes range from $0.01 to $147,000, the well-to-do workers do not contribute to Social Security. In 2023, this might change.
In order to avoid Social Security cuts, many lawmakers are fighting in order to raise the cap for those who need to contribute to the Social Security Program by increasing the NAWI (National Average Wage Index). This means that these well-to-do workers will most likely need to open their wallets next year.
3- Maximum monthly benefit will climb it seems.
If the well-to-workers will have to pay more taxes this year, looks like the well-to-do retirees will receive more as well.
Despite the fact that the percentage of the retirees who receives the maximum income is small, that doesn’t mean this change is a small change.
Ins 2022, the maximum Social Security Income a person receives is $ 3,345.00/month, compared to $3,148.00/month in 2021.
Well, it appears that in 2023 this value will raise even further. As we said before, inflation rises at such a speed, that most likely the maximum monthly benefit will keep up the pace.
In order to be able to receive the maximum monthly benefit, a person needs to:
- Wait until full retirement age to claim the benefit;
- Work a minimum of 35 years;
- Reach or surpass the maximum taxable earning caps for all 35 years.
4- The set point in order to be able to qualify for Social Security might rise a little
In order to be able to receive the Social Security benefit, an American worker needs to earn 40-lifetime work credits. Throughout the year, a worker can gain only 4 credits at maximum, every year, the income dictates how many credits will you gain.
This year, $1,510.00 in earned income was sufficient for one-lifetime credit. However, it is interesting to notice that 5 years ago, the money necessary for credit was $1,300.00.
This means that in order to guarantee eligibility for the Social Security program, workers will have to work a little more, and this tendency is most likely to rise over the years.
Because of its importance, understanding the changes that came and are coming for Social Security is a must if the worker wants to have a peaceful retirement.
Understanding the past and trying to foresee the future may be risky, however, it is the best course of action. If you want to set a goal to a good Social Security and other sources of income, in order to enjoy the golden years with peace and quality of life.
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