Millions of older Americans rely on Social Security to pay the bills in retirement. While your benefits were never designed to be your sole source of income, they can go a long way toward making ends meet.
In 2022, the average retiree collects around $1,657 per month in benefits, according to the Social Security Administration. But there are a few reasons you could see larger checks in 2023.
1. Higher cost-of-living adjustment (COLA)
Most years, seniors receive slightly higher payments as part of the annual cost-of-living adjustment, or COLA. In 2022, Social Security saw a 5.9% raise, which is the biggest increase in decades.
Because the COLA is linked to inflation, next year’s adjustment will likely be even larger. While the official data won’t be released until later this year, some experts predict it could be as high as 8.6%.
2. Higher maximum benefit amount
There is a maximum amount you can collect from Social Security, and it changes every year. In 2022, that maximum is $4,194 per month. To receive this amount, you’ll need to have earned a substantial income throughout your career, work for at least 35 years, and delay benefits until age 70.
It’s unclear exactly what next year’s maximum benefit amount will be. But from 2021 to 2022, it increased close to $300 per month. It’s safe to say that with inflation as high as it is, we’ll likely see an even bigger boost in 2023.
While most seniors won’t qualify for the max benefit, those who do could receive a hefty bonus next year.
3. Higher earnings limit
If you continue to work in any capacity after claiming Social Security and you haven’t yet reached your full retirement age (FRA), your benefits could be temporarily withheld.
In 2022, the earnings limit is $19,560 per year, or $51,960 if you’re reaching your FRA this year. If you earn more than that while receiving Social Security, your benefits will be either partially or entirely withheld until you reach your FRA.
Next year, though, those limits will likely be higher. That means you can earn more without having your benefits withheld, leaving you with larger checks each month.
What to expect in 2023
The reality is that most of Social Security’s changes each year are linked to adjustments in inflation. So while you’ll likely receive larger checks in 2023, that won’t necessarily increase your buying power.
As prices continue to soar, seniors have actually been losing purchasing power over the years even with annual raises. In fact, since 2000, Social Security benefits have lost roughly 40% of their buying power, according to a report from The Senior Citizens League.
That said, when prices are high and many seniors are struggling to pay the bills, every little bit counts. And an increase in benefits could make it easier to stay afloat financially in retirement.
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