Pamela Kweller RSSA Staff
Every year there are changes to the Social Security program. And with more than 65 million Social Security beneficiaries, these changes impact a lot of people. Here are three significant changes that will take effect beginning January 2023.
1. Social Security beneficiaries will receive more money each month.
There will be an 8.7% increase in benefits in 2023. This is the Cost of Living Adjustment commonly referred to as COLA. Beginning January 2023, more than 65 million Social Security beneficiaries will receive an 8.7% increase in their Social Security benefits.
The average monthly Social Security benefit for 2022 is $1,681. With an 8.7% increase, the average beneficiary will expect to receive almost $150 more each month, making the average monthly Social Security benefit for 2023 $1,827.
This means the maximum monthly benefit has also increased.
If someone filed for Social Security benefits at their Full Retirement Age (FRA) in 2022, the maximum monthly benefit possible to receive was $3,345. In 2022, that maximum monthly payout has been increased to $3,627. This means that in one year, an individual (filing at FRA) can earn up to $43,524 in Social Security income.
Plus, if someone waits to file past their FRA up until age 70, they can receive even more money monthly and annually.
2. The amount of earnings subject to the payroll tax has been increased.
Social Security is a pay-as-you-go program. Social Security recipients receive benefits from the workers who pay into the system through the payroll tax (FICA or SECA).
12.4% of income is subject to the Social Security payroll tax. Half is paid by the employee and half is paid by the employer. If a worker is self-employed, they must pay the full 12.4%. However, unlike the Medicare payroll tax, not all earnings are subject to the Social Security payroll tax.
In 2022, the maximum taxable earnings limit was $147,000. In 2023, the limit has increased to $160,200. Earnings that exceed $160,200 will not be subject to the Social Security payroll tax.
3. Workers need to earn more money to earn work “credits.”
In order to be eligible for Social Security benefits, you must have earned a minimum of 40 “credits” or “quarters of coverage”. The credit may only be earned from a job that pays Social Security payroll taxes. You cannot earn more than 4 credits in one year and therefore, you must work a minimum of 10 years in order to earn those 40 credits.
The amount of earnings required for one credit in 2022 is $1,510. In 2023 the amount has increased to $1,640. This means that you can earn the maximum 4 work credits in 2022 by earning a minimum of $6,560.
Learn more about Social Security changes here.