5 Ways the Social Security System Will Change in 2023

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Social Security recipients probably already know that their benefits are increased almost every year to counter the effect of inflation. But this cost-of-living adjustment is just one of many annual adjustments to the social security system.

These increases affect people who are already retired as well as those who have not yet retired.

Here is a preview of what will change for 2023.

1. The increase in benefits

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Social Security recipients will see their monthly payments increase by 8.7% in 2023, as we detailed in “Social Security Payments Will Increase in 2023.”

This cost of living adjustment (COLA) translates to an additional $146 per month, based on the average Social Security payment for retirees.

However, not all retirees will see as much additional income from Social Security in 2023, as the Medicare Part B premium is withheld from some retirees’ Social Security payments.

For some people, the extra income may also be offset by higher taxes.

2. The income ceiling for active retirees

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If you are claiming Social Security retirement benefits before reach full retirement age and continue to work, the Social Security Administration will withhold part of your benefits if your income exceeds what is called the earnings limit. (There is no penalty for earnings made while working after you reach full retirement age.)

This earnings limit generally increases each year as the national average wage index increases. For 2023, it will increase:

  • From $19,560 to $21,240 if you reach full retirement age after 2023
  • From $51,960 to $56,520 if you reach full retirement age in 2023

The Social Security Administration notes, however, that you do not lose any withheld benefits due to your earnings exceeding the applicable earnings cap. Once you reach full retirement age, your monthly benefit is permanently increased to account for the months in which benefits were withheld.

3. The capping of income tax on workers

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Here’s another annual adjustment based on increases in average wages: The maximum amount of a worker’s income subject to Social Security payroll taxes will increase from $147,000 in 2022 to $160,200 in 2023.

So if you’re lucky enough to earn more than $160,200 in 2023, you won’t owe payroll taxes on every dollar you earn.

The Social Security contribution rate itself will remain the same in 2024: 6.2% for employees (employers pay an additional 6.2% on behalf of their employees) and 12.4% for the self-employed.

4. The income required for a loan

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Not everyone is entitled to pension benefits. As we explain in “6 Groups Who Can’t Count on Social Security Benefits”:

“To receive Social Security retirement benefits, most people must accumulate at least 40 “credits” over their working life, according to the US Social Security Administration (SSA). Currently, you can earn up to four credits per year if you work and pay social security contributions.

The income required for you to receive a Social Security credit, also known as quarter coverage, will increase from $1,510 in 2022 to $1,640 in 2023.

5. Maximum profit

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There is a limit to the amount of money a retiree can receive in monthly benefits. This is called the maximum Social Security benefit.

Your maximum Social Security benefit depends on the age at which you retire. The maximum benefit for someone retiring at full retirement age will increase from $3,345 per month in 2022 to $3,627 per month in 2023.

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