Final Reminder: These Social Security Changes Take Effect in 2023
For most Social Security recipients, the biggest change set to take effect in 2023 is an 8.7% cost-of-living adjustment — the highest in 41 years. But that’s far from the only change heading into the new year.
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There will also be changes in Social Security disability thresholds, Social Security earnings limits and Medicare premiums deducted from Social Security payments.
Here’s a final look at Social Security Administration changes for 2023 as we head into the new year.
Historically High COLA
The 8.7% increase in the Social Security COLA for 2023 is the highest since an 11.2% hike in 1981. For that you can thank soaring inflation in 2022. As GOBankingRates previously reported, next year’s adjustment will raise the average payment for retired workers by $146 a month, from $1,681 in 2022 to $1,827 in 2023.
The maximum benefit for Social Security claimants at full retirement age will be $3,627 a month in 2023, according to the SSA — up from $3,345 in 2022. The new payment amount will start in January 2023 for most Social Security beneficiaries. For those receiving Supplemental Security Income benefits, the new payment amounts will begin on Dec. 30, 2022.
One thing to keep in mind is that not everyone will receive the 8.7% COLA. That’s because the COLA is applied to your primary insurance amount rather than your current benefit — and the two are not always the same. To find out more about your 2023 payment, visit your my Social Security account.
Lower Medicare Premium
As has been widely reported, the 5.9% COLA that Social Security recipients got in 2022 was ineffective in battling an inflation rate that spent much of the year above 8%. To make matters worse, a record-high increase in Medicare Part B premiums meant Social Security recipients had even more money deducted from their monthly payments.
Here’s the good news: The standard Part B premium will decline to $164.90 a month in 2023 from $170.10 in 2022.
Higher Social Security Disability Thresholds
The SSA pays monthly benefits to people who are unable to work for a year or more because of a disability. These benefits typically continue until recipients can work again on a regular basis. However, you might also have a qualifying disability even if you’re still working, like when a medical condition prevents you from doing jobs you could previously. When this happens, you’re only eligible up to a certain amount of income. Following are the threshold changes for 2023, based on average monthly earnings:
2022 | 2023 | |
Non-Blind | $1,350/month | $1,470/month |
Blind | $2,260/month | $2,460/month |
Trial Work Period (TWP) | $970/month | $1,050/month |
Higher Social Security Tax Threshold
The SSA is mainly funded from payroll taxes that are typically split between employees and employers, with self-employed individuals picking up the full amount themselves. As the AARP noted, the tax rate hasn’t changed in years, but the amount of income subject to it increases along with the COLA.
In 2022, employees had to pay Social Security taxes on annual income up to $147,000. In 2023, the threshold rises to $160,200, meaning neither you nor your employer will have to pay Social Security taxes on any income above that level.
Social Security Earnings Limits Increase for Work Income
Social Security recipients who also earn other income might have their payments reduced, depending on the amount of outside earnings. For those who have not reached full retirement age, the yearly threshold rises to $21,240 in 2023 from $19,560 in 2022. For every $2 in work income above that limit, the SSA withholds $1 in benefits.
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If you reach FRA in 2023, the SSA will withhold $1 in benefits for every $3 in earnings above $56,520 until the month you reach full retirement age. That threshold is up from $51,960 in 2022. After you reach FRA, none of your benefits are reduced regardless of how much you earn.
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This article originally appeared on GOBankingRates.com: Final Reminder: These Social Security Changes Take Effect in 2023
