Social Security will be witnessing many changes in 2023; many connected to the highest cost-of-living adjustment (COLA) in more than 40 years. The new COLA will affect payments to Social Security claimants, but it’s not the only change you will notice in 2023.
According to the Social Security Administration’s newly issued information, the program will undergo the following six modifications in the new year.
New COLA Becomes Effective
In 2023, the Social Security cost-of-living adjustment (COLA) will increase by 8.7%, the largest increase since the 11.2% increase in 1981. Next year’s significant COLA increase is a result of this year’s skyrocketing inflation rate, which is the highest in 41 years.
The average monthly Social Security payout for all retired employees is projected to increase to $1,827 in 2023 from $1,681 in 2021, a monthly increase of $146.
The increased payment level for those receiving Social Security benefits will begin in January 2023, according to the SSA.
Supplemental Security Income Increase
For people receiving Supplemental Security Income (SSI), the increased payment amounts will commence on Dec. 30, 2022. Beneficiaries of both categories will have their payments on the same schedule, with the SSI increase occurring just before the Social Security increase.
Remember that the 8.7% COLA for 2023 will not apply to all Social Security claimants. Due to various circumstances, including your main insurance amount (PIA) and when you enroll in Medicare, some payment increases will be more than 8.7%, and others will be lower. Beginning in December, the SSA will start issuing COLA notifications to recipients with specifics on next year’s payout levels.
Increase in Social Security Disability Eligibility Criteria
The SSA gives a monthly payment to beneficiaries who cannot work for a year or more due to a disability. The benefits normally continue until beneficiaries can work again regularly. However, there are other occasions when you could have a qualifying impairment even if you’re still working, such as if you can’t do employment you previously did because of your medical condition. In this situation, eligibility is capped at a specified income level, and you cannot be deemed to have a qualifying impairment when you cross that level. The following threshold modifications are based on average monthly wages for next year:
- Non-Blind: $1,350/month to $1,470/month
- Blind: $2,260/month to $2,460/month
- Trial Work Period (TWP): $970/month to $1,050/month
SSI Federal Payment Standard Rises
Social Security beneficiaries eligible for Supplemental Security Income (SSI) will experience a rise in their maximum federal SSI payments in 2023 due to the 8.7% COLA. In 2022, the average monthly premium for people would climb to $914 from $841. In 2023, the monthly payout for couples would increase to $1,371 from $1,261 in 2022.
Increase in Maximum Benefits for Retirees at Full Retirement Age
American retirees who reach full retirement age — 66 or 67, based on the birth year — will increase next year. The monthly limit will increase to $3,627 in 2023 from $3,345 in 2022.
Those still employed will see their maximum taxable income rise.
Anyone who gets a paycheck knows that Social Security taxes are deducted from their salary. Social Security imposes a cap on the amount of your yearly earnings subject to taxation, referred to as the maximum taxable earnings. This maximum will increase from $147,000 in 2022 to $160,200 in 2023.
Modifications to Earnings-Test-Exempt Amounts
If your wages reach a specific threshold and you do not reach full retirement age, Social Security will withhold your payments (FRA). This is known as the exemption amount for the retirement earnings test. According to the SSA, one of two exempt amounts applies a lesser amount in the years preceding FRA and a greater amount in the year of FRA.
For those under full retirement age, the exempt level for the earnings test will increase to $1,770 per month in 2023, up from $1,630 per month in 2022. If you have achieved FRA, your monthly benefit will increase to $4,710 in 2023 from $4,330 in 2022.