Over the last few years, inflation has sky-rocketed here in America. Thankfully, one of the many changes that have been announced by the Social Security Administration (SSA) recently is a boost to the cost of living adjustment (also known as COLA) for benefit checks to be issued in 2023. 

What You Need to Remember: Social Security Today

With more than 70 million people who depend on at least one of the benefits offered by this program, it is no wonder that changes are always highly anticipated. But with the rate of inflation recently, substantially higher benefit checks will certainly be met positively by seniors and others who stand to benefit. In this article, we’ll touch on 5 changes happening to Social Security this year and what to watch for.

1. Increasing the Cost of Living Adjustment (COLA)

Perhaps the most significant change is that the benefit checks will receive an 8.7% increase in 2023, which is substantially higher than even the 5.9% adjustment in 2022. This will be the highest increase since 1981, which saw a raise of 11.2%. Beginning in January, the adjustment coming in 2023 should increase the average for retired workers from $1,681 to $1,827.

2. Raising the Maximum Taxable Earnings

Workers who pay into the system are taxed on their wages up to a specified amount, usually at 6.2%. Last year, the maximum amount of earnings that were subjected to Social Security taxes was set at $147,000. This year, however, that amount will be increased to $160,200, which means that more of a worker’s income will be taxed.

3. Higher Maximum Social Security Benefit

Also increasing in 2023 is the maximum benefit that a worker retiring at full retirement age, which is 67 for anybody born after 1960. For anyone retiring before their full retirement age, however, the maximum will be reduced. This benefit maximum might actually be increased if you retire after your full retirement age.

4. Better Benefits for Spouses and Disabled Workers

Although individual circumstances may vary, the average benefits are increasing across the board. This will include those benefits being drawn by the disabled, widows, and widowers. 

5. Adjustments to the Earnings Test Exempt Amounts

When you claim your retirement benefits before you have reached the required full retirement age, the SSA will withhold a portion of your benefits beyond a certain level of income. This amount, called the retirement earning text exempt amount, can claim a significant amount of your benefits if you are still working.

The 2023 Breakdown

If you do start to collect Social Security before your full retirement age, you can earn up to $12,240 per year before the SSA will begin to withhold benefits. The rate at which they will do so is $1 of benefits for every $2 you earn above that limit.

If you would reach full retirement age in 2023, this limit will still apply, though with more lenient terms and only until the month that you reach full retirement age. If this is the case for you, you can earn up to $56,520 per year and the rate for exceeding this is $1 of benefits for every $3 you earn above the threshold.

Lower Medicare Premiums

While they are entirely different programs, most retirees participate in both Social Security and Medicare. In 2023, Medicare Part B is decreasing its premiums from $170.10 to $164.90. This will certainly be welcomed news for the nearly 64 million Americans enrolled in this program.

Bottom Line: Some Much-Needed Adjustments

With the rate of inflation over the last few years, many Americans have been increasingly worried about what will be left of the Social Security program by the time they can retire. Thankfully, because of this huge increase, we will see one of the largest adjustments in the history of Social Security. This is certainly one area where hearing the word “increase” may actually bring a smile to many faces for a change.