5 Changes to Social Security You Probably Didn’t Know

Every year, the government makes changes to the Social Security program, but rarely are those changes as drastic as what we can expect in 2023. Many will affect seniors who are already receiving benefits, but there are a few that will affect workers still trying to qualify for theirs. Here’s a closer look at five of the most significant changes coming to Social Security in 2023.

1. Cost-of-living adjustment: 8.7%

Social Security gets an annual cost-of-living adjustment (COLA) to help seniors’ checks keep pace with inflation. Thanks to the historically high inflation rate this year, checks are expected to grow by 8.7% in 2023. That’s the third-highest COLA since 1980.

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Exactly how much your checks will increase depends on how much you’re receiving right now. But the average senior can expect another $147 per month beginning in January.

2. Changing definition of a Social Security credit

You must earn 40 Social Security credits in order to qualify for retirement benefits on your own work record, but the definition of a credit changes each year. In 2022, a credit is defined as $1,510 in earnings, and you can earn a maximum of four credits per year.

In 2023, workers will need to earn $1,640 to collect one credit. However, this won’t affect you if you’ve already earned your 40 credits in previous years.

3. More income subject to Social Security taxes

In 2022, you only pay Social Security taxes on the first $147,000 you earn, and only that much counts toward your Social Security benefit in retirement. But that ceiling is rising in 2023 to $160,200.

This shouldn’t affect most workers, though. If you’re earning less than $147,000, you’re already paying Social Security taxes on all of your income, and this won’t change next year.

4. Increased maximum benefit

The maximum Social Security benefit is also rising next year from $4,194 to $4,555 per month. But don’t get too excited about this. The requirements remain as stringent as ever.

You have to earn the maximum income subject to Social Security taxes (see above) in at least 35 years and delay benefits until 70 when you qualify for your largest possible checks. Even a lot of wealthy people don’t pull this off. But if you fall short, you can still score some pretty sizable checks by working longer and choosing your starting age carefully.

5. Higher income thresholds for the earnings test

Workers who claim Social Security while under their full retirement age (FRA) — 66 to 67 for today’s workers — could lose money to the earnings test. Those who will be under their FRA for the whole year lose $1 from their checks for every $2 they earn over $19,560 in 2022. And those who will reach their FRA this year lose $1 for every $3 they earn over $51,960 if they hit this amount before their birthday.

In 2023, these limits are rising to $21,240 and $56,520, respectively. So workers will have a little more breathing room before they have to worry about losing any of their checks.

It’s worth noting that money lost to the earnings test isn’t gone forever. When you reach your FRA, the government recalculates your benefit and gives you larger checks going forward to make up for the money it withheld previously.

These changes may not all apply to you, but it’s good to keep them in mind anyway. The government makes similar changes to the program annually, so even if they don’t affect your benefit now, they could in the future.

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