7 Things To Know About The 2023 Social Security Changes
Will these changes impact your next check?
Provided by Rainer Wealth Management
Are you currently receiving Social Security benefits? Or maybe you’re still a few years out? Whichever group you fall into, the Social Security Administrations has made some changes that will impact your monthly benefit amount. Let’s briefly dive into some of these changes.
1) 8.7% COLA Increase
If you have been collecting social security checks, you may have noticed in January that the amount is higher than usual. Don’t worry, it wasn’t a typo. That was due to the 8.7% COLA increase for 2023. Which compared to the 5.9% COLA increase in 2022, is even higher.
For those of you who are age 62 and older but have not started benefits yet, you will see the COLA increase when you actually claim your benefit. The increase applies also to spousal, survivor, and dependent benefits.
2) New Indexing Factors and Bend Points
There is a lot that goes into how the Social Security Administration calculates your monthly benefits but in a nutshell, the formula uses a combination of your top 35 years of earnings up to the social security base wage, an indexing factor and dollar values in different ranges called “bend points”.
The average wage index went up 8.89% and the bend points also increased for 2023. What does this ultimately mean for you when it’s your time to file for social security benefits? A higher monthly benefit.
3) Increased Earnings Test Thresholds
If you receive social security benefits prior to your full retirement age (FRA) and also earn wages above a certain threshold, a percentage of your benefits will be withheld. This earnings threshold amount has increased this year, which means you can earn a little bit more before your benefits are impacted.
The earnings test threshold for those prior to full retirement age (FRA) has increased from $19,560 to $21,240. For this group, this means $1 in benefits is reduced for every $2 of earnings that is above this amount. For those who are in the year of their FRA, it has increased from $51,969 to $56,520 and the amount withheld is less. For each $1 of benefits, $3 of earnings is withheld.
The biggest takeaway for you to keep in mind is that if you are still working and have not yet reached your FRA, don’t file for Social Security yet. Delaying it until you reach your FRA ensures you receive your maximum benefit allowed.
4) Maximum Taxable Wage Base Increase
The maximum taxable wage base is the amount of wages earned that is subject to taxes. This value has increased to $160,200. The good thing about this increase is that the longer you keep working, the better your earnings record can improve, resulting in possibly higher benefit amount.
The reason for this is because higher earnings in the later years that are near the wage base counts for more than the earlier earnings. So this means you have the opportunity to replace some of your lower earnings years with earnings in the later years and receive higher monthly checks.
5) Deadline For Restricted Application
The SSA will soon be phasing out the ability to file for spousal benefit while delaying the filing of one’s own benefit to age 70. As of today, only if you were born before January 2, 1954, can you file for what is called restricted application and you only have up until you are age 70 to do it.
Some important criteria to note is that you must not have previously filed for benefits, the other spouse must have already filed, the other spouse need not be born before 1954 and it does not apply to survivor benefits.
6) Medicare numbers update
Due to overly inflated 2022 premiums, Part B base premiums has been adjusted from $170.10 to new premium amount of $164.90.
IRMAA (Income-related monthly adjustment amount) income brackets has also been adjusted for inflation. Now, additional premium amounts occur when someone has an AGI more than $97,000 for single and $194,000 for married filing jointly.
Looking ahead into 2024 though, trustees are projecting the Part B premium to increase 6% and IRMAA amounts are also increasing.
7) OASDI Trust Fund
“Will Social Security even be around when it’s time for me to file for benefits?” Well, according to the 2023 OASDI Trustees Report, long-term projections predict that without any social security reform, scheduled payable benefits will fall to 80% starting in 2034 and decrease even further to 74% going into 2097.
The Bernie Sanders Social Security Expansion Act proposes to withhold payroll taxes on those with earnings over $250,000. This would allow the Trust fund to stay fully funded and be able to continue to pay the scheduled benefits in full.
To see other current reform proposals, visit https://www.ssa.gov/oact/solvency/index.html.
For more information or to schedule a consultation, please give us a call at (925) 217-4280.
Trice C. Rainer, MBA, CFP®
Elizabeth Mintzer
390 Diablo Road, Suite 202, Danville, CA 94526
Securities offered through Registered Representatives of Cambridge Investment Research, a broker/dealer, Member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Cambridge, Protected Investors of America and Rainer Wealth Management are not affiliated. Registered for Securities in CA, IN, MA, NC, NJ, OH, OR, WA.
Citations
1. Floyd, Elaine, CFP® (2023, May 30). What’s New With Social Security (And Medicare): 7 Topics To Watch. FPA NorCal Conference, San Francisco, CA United States.
2. https://www.ssa.gov/oact/cola/AWIgrowth.html
3. http://www.ssa.gov/oact/cola/bendpoints.html