by Dave Kutcher
Each October the US Social Security Administration announces annual changes to the program for the upcoming year.
For 2023, those changes include a significant Cost of Living Adjustment, an increase in the maximum earnings subject to social security taxes and an increase in disability benefits.
Here are some highlights for you to consider.
•Social Security recipients will get a whopping 8.7% raise for 2023… this is the largest increase in the last 40 years. This increase brings the average monthly benefit for all retired workers to $1,827 per month, up from $1,681 in prior year.
•The maximum earnings subject to social security taxes has risen to $160,200. This is a 9% increase in wages that are not subjected to tax.
•Tax rates are remaining the same at 6.2% for employees and 12.4% for the self-employed.
•Additional changes include increases in how much a social security recipient can earn before there is an offsetting benefit imposed.
The earliest you can begin to claim retirement benefits remains at age 62, but if you choose to claim your benefits prior to your full retirement age will permanently reduce your future payments.
Normal or full retirement age is currently age 67 for anyone born in 1960 or later.
If you can choose and plan to delay taking your benefits until a later age you will increase your benefits beyond the normal retirement age payout. The maximum payout for a normal retirement age benefit is currently $3,627 per month. Your benefits will increase 8% per year beyond normal retirement age up to age 70.
If you work while collecting benefits
Before reaching your full retirement age, you will be able to earn up to $21,240 in 2023. After that, $1 will be deducted from your payment for every $2 that exceeds the limit. The 2023 annual earning cap is a $1,680 increase over the 2022 limit of $19,560.
If you reach full retirement age in 2023, then you will be able to earn $56,520, up $4,560 from the 2022 limit of $51,960. For every $3 you earn over the limit, your Social Security benefits will be reduced by $1, but that will only apply to money earned in the months before full retirement age. Once you reach full retirement age, no benefits will be withheld if you continue working.
Social Security Disability Benefits and Income Thresholds Increased
In most years, Social Security disability payments increase only slightly. However, those who receive Social Security disability benefits will get an 8.7% increase in 2023.
Along with the increase in benefits, the amount that disabled workers can earn without losing access to SSDI has also increased. Non-blind disabled workers can have benefits of up to $1,470 per month, up from $1,350 in 2022. Blind workers have a higher cap of $2,460 per month in 2023, up from $2,260.
Credit Earning Threshold Went Up
If you were born in 1929 or later, you must earn at least 40 credits (maximum of four per year) over your working life to qualify for Social Security benefits. The amount it takes to earn a single credit goes up slightly each year.
For 2023, it will take $1,640 in earnings per credit, up $130 from 2022.
In summary
Social Security benefits increased substantially in 2023 together with broader price increases that consumers faced due to inflation. Figuring out the perfect time to take your retirement benefits will depends upon several things, including your financial condition and retirement goals. Consider consulting a financial advisor to fully understand your Social Security benefits and how they can fit into your overall retirement budget.
My name is David A. Kutcher, a retired Marine Corp Captain. My business partner in the lower 48 is Richard C. Scott, CLU, LUTCF. For nearly 40 years we have been helping folks with their personal retirement decisions. You can catch us on the radio every Saturday morning, “Retirement in the Last Frontier”, 8:30-9:30 on AM 650, Keni Radio. Frontier Retirement, 10928 Eagle River Road; Eagle River, AK 99577, (907) 795-7452.
