The Social Security Administration makes changes every year, and this year, they didn’t neglect to make changes for 2023. The changes that the administration is going to announce in October could potentially take effect on January 1 of next year, and they are the following:
An Increase in the Maximum Benefit.
The fact that Americans are going to have to pay more in taxes doesn’t please anyone, but this is actually a good thing for those earning the highest wages. If they earn more money, then the IRS will be able to tax more of their money, but there is also good news for their future Social Security benefits. The SSA will have more money to credit toward their Social Security benefits. Whenever the government increases the wage base, Social Security earnings must also increase.
The main factor that determines the amount you are going to receive in Social Security benefits is the amount of money that you earn over your lifetime. In 2022, the maximum possible Social Security benefit was equal to $4,194, but this is likely to increase next year.
An Increase in the Earnings Limit.
You can file for your retirement benefits before you reach your full retirement age, and if you do this, the SSA may temporarily reduce your Social Security benefits if you continue to work. There are limits for the amount of money you can earn when you do this, and if you surpass those limits, your benefits will be subject to being reduced. You can avoid this reduction if the earnings limits are increased, and we can expect the SSA to do exactly that next year.
In 2022, you would be exempt from this reduction if you earn at the most $19,560 each year. This would be $1,630 each month. When you exceed these limits, the SSA reduces your benefits $1 for every $2 that you earned above the limit. If you are going to reach the full retirement age this year, your benefits would be reduced $1 for every $3 that you earned above the limit. This is equal to $51,960 a year or $4,330 a month until you reach the full retirement age. After that occurs, everyone is exempt from having their benefits reduced.
We must remember that the reductions in benefits are only temporary. After you reach the full retirement age, your adjusted payments will reflect the payment of benefits that were withheld in previous months.
A Large Cost-of-Living Adjustment.
In 2022, Americans received the largest cost-of-living increase since 1982 at 5.9%. Because inflation has continued to plague our country, it wouldn’t surprise anyone to know that the cost-of-living adjustment or COLA is going to be even larger. Based on the current inflationary trends, some analysts are saying that the COLA for 2023 is going to be as high as 8.6%.
Experts often quote the Consumer Price Index as the inflation rate, but the Social Security Administration uses the Consumer Price Index for Urban Wage Earners and Clerical Workers or CPI-W. The SSA is going to consult the CPI-W at the end of the third quarter to determine what the COLA needs to be for the year 2023.
Social Security is known for being a static program that doesn’t change very much as time goes by. The one time when this isn’t the case is when inflation requires that the SSA make adjustments to the COLA. All beneficiaries need to keep their eyes on the changes listed above because they are going to be meaningful for everyone as we move forward.