The 2023 Social Security Changes You Need to Know

(Dan Caplinger)

When it comes to financial support for older Americans, Social Security plays an important role. With tens of millions of people receiving regular monthly checks from the program, there are many whose financial plans for retirement would be very different without Social Security.

As the end of the year approaches, Social Security recipients need to prepare for some major changes to the program. Some of them are undoubtedly good, but others may affect your money more. Read on to learn more about the must-know facts about Social Security in 2023.

1. Senior citizens will receive 8.7% of the cost of living

An important aspect of social security is that it adjusts its wages for inflation every year. The amount of the cost of living adjustment, or COLA for short, changes every year based on figures from the Consumer Price Index. Seniors will see their higher paychecks arrive in January.

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Image source: Getty Images.

The Social Security Administration has provided information on the extent to which the COLA affects the average contributor. The average benefit among retired workers will increase by $146 to $1,827 per month after the COLA is implemented. Couples receiving spousal benefits should see an average COLA increase of $238 to $2,972, while widowed parents of two children could see an increase of $282 to $3,520. Surviving spouses without children could see their benefits increase from $137 to $1,704 per month.

The 8.7% COLA would be the largest in more than 40 years, reflecting recent increases in the cost of living. As a result, seniors will be happy to see the increase, but it really starts to offset the higher premiums they paid in 2022.

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2. Social Security benefits increase

Those who retire in 2023 will have a higher maximum Social Security benefit than those who retire in 2022. Those who retire at age 62 at the earliest will receive $ 2,572 monthly maximum, rising to $208 in 2022.

Benefits for others will depend on when they retire. The biggest boost is available to those who wait until age 70 to retire in 2023, with the maximum jump from $361 to $4,555 per month. Those who retire at 65 will see the largest increase of $286 to $3,279, while benefits of $266 and $240 will apply to those retiring at 66. and 67.

3. Payroll taxes will go up for social security for high earners

Social Security gets most of its money from payroll taxes, and there will be a big increase in the maximum tax rate per worker in 2023. The base salary determines how much is the highest wage the government collects in payroll taxes, and that number received a $13,200 increase to $160,200 by 2023.

The result is that workers making more than $160,200 will have an additional $818.20 withheld from their wages during 2023. Those who are self-employed may have to pay double the additional tax, or $1,636.40. For most workers, however, the change will be insignificant, as only a small percentage of Americans earn the top salary of $160,200.

One thing remains constant — finally

Next year we will also end a series of changes that have resulted in lower benefits for older Americans in general. The full retirement age (FRA) has been gradually increasing, but has reached 67 for those born in 1960 or later. As a result, those who claim benefits before age 62 in 2023 will have the same FRA as their peers in 2022. However, they may still see a 30% haircut in their age 62 compared to what they would have if they waited to claim until their FRA five years later.

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Knowing the latest Social Security changes can ensure you get all the money you deserve. In general, seniors will appreciate the changes to the program in 2023, but you’ll want to keep track of your Social Security payments to make sure you’re getting everything you’re entitled to in terms of benefits. you understand.

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