(ProsperNews.net) – Social Security is a federal program that financially supports retirees, disabled individuals who can’t work, and survivors of deceased workers. Because the cost of living and other economic factors change over time, retirement benefits are subject to periodic adjustments to reflect the changing needs of beneficiaries.
These changes factor in retirement age, cost-of-living adjustments, and benefit calculation formulas, among others. Understanding the upcoming shakeups is vital for individuals relying solely on Social Security benefits to support themselves. Social Security cost-of-living adjustment (COLA) will experience many changes, and here is what to expect in 2023.
New COLA Impact on Social Security Payments to Beneficiaries
The new COLA is a periodic adjustment to Social Security earnings to account for the increased cost of living. The COLA increase for 2023 is set to rise from 5.9% in 2022 to 8.7% in 2023, as announced by the Social Security Administration (SSA). This gain means Social Security beneficiaries will receive an additional $146 monthly. So, if the average beneficiary got $1681 per month in 2022, they will now take home an additional $1,827 monthly starting January 2023.
This steep hike is particularly essential for individuals who rely exclusively on Social Security benefits as their primary source of revenue. Note, the 8.7% COLA for 2023 does not apply to all Social Security beneficiaries. Some will be greater than 8.7% and vice versa due to factors such as your primary insurance amount (PIA) and when you enrolled in Medicare. The SSA will mail recipients COLA notices detailing new payment amounts.
Thresholds for Social Security Disability Insurance Will Increase
The SSA pays monthly benefits to disabled individuals who cannot work for more than a year until they can resume full-time employment. It examines the Consumer Price Index (CPI) to determine whether a COLA is required for Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) benefits. If the CPI rises, the SSA could increase disability limits.
Even if a person is still working, they may have a qualifying disability. In this case, they are only eligible for a certain income level. They are no longer considered to have a qualifying disability once they have passed that threshold.
Supplemental Security Income (SSI) Standard Federal Payment Will Rise
The maximum federal payment amounts for Social Security recipients who also qualify for Supplemental Security Income will increase in 2023. Based on the 8.7% COLA, qualified beneficiaries will start receiving a monthly payment of $914, those with eligible spouses will earn $1,371 per month, and approximately $450 for essential persons.
Social Security beneficiaries receiving Medicare will access their new higher benefit amount for 2023 in December via the “my Social Security Account” message center and the mailed COLA notice. Other Social Security changes to expect in 2023 include:
- An increase in maximum benefits from $3,345 to $3,627 monthly in 2023 for employees retiring at Full Retirement Age (FRA) of 66 or 67.
- The maximum taxable earnings limit for retirees still working will rise to $160,200 in 2023 from $147,000 in 2022.
- The Social Security retirement earnings test amounts will go up from $1,630 in 2022 to $1,770 monthly or $21,240 annually in 2023.
- Higher spending patterns caused by the 8.7% COLA increase could make reducing inflation challenging. Consequently, the Central Bank is expected to raise interest rates to combat price increases.
Key Takeaways
The SSA announcement on the highest cost-of-living adjustment takes effect on January 1, 2023. Applicable changes increase the average Social Security retirement benefit amount by $146 per month, while lowering the standard monthly Medicare premiums by $5.20 per month. So, whether you’re in or nearing retirement, it’s critical to regularly review your retirement portfolio and income strategy with your financial advisor. Keep a close eye on your taxes due to changes in income threshold, and maintain a budget to help maximize your Social Security benefits.
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