Social Security Changes For 2023 - Cravitz Financial & Insurance Solutions

Social Security Changes For 2023

In this video we will talk about some of the important changes to know for Social Security in 2023. The cost of living adjustment (COLA) is 8.7%. The maximum taxable earnings for payroll taxes is going up, and so are the retirement earnings test exempt amounts. 

Full Transcript:

Social Security has announced changes for the year 2023. And so, I want to go through not everything, but I want to go through some of the quick highlights and key things that I think you're going to definitely want to know. So let me share my screen.

Now, this is coming straight from Social Security's website. And as you can see right here, in 2023, the COLA, the Cost of Living Adjustment, is going to be 8.7%. We haven't had a COLA that high on Social Security in over four decades. And in fact, you could see that right here. Here's the history of Cost of Living Adjustments since 1975. Again, for 2023, it'll be 8.7. In 2022 was 5.9. Before that, we've had a lot of really low cost of living adjustments, and that's because inflation's been low and we can see that here. And in fact, in 2016, 2011, and 2010, there was no cost of living adjustment. So you have to go all the way back. You'll see right here in 1981 there was an 11.2% Cost of Living Adjustment. So again, this is one of the highest that we've seen in quite some time.

The other thing that's interesting now too is, what's been happening sometimes is that, yes, we'll get a Cost of Living Adjustment Social Security, but then we'll also have to find out or we'll also find out that Part B with Medicare is going to cost more. But that's not going to happen in 2023. And in fact, this is the CMS website, which is the Centers for Medicare and Medicaid Services. See that right there? Oops. So the standard monthly premium for Medicare Part B enrollees will be 164.90 for 2023, which is a decrease of $5.20. So that's for most people.

If you're subject to Irma-based, if your income is at a certain limits, then you do pay more than the standard monthly premium. But otherwise, for most people, that's where you're going to be. Now, $5.20 is not a huge amount, but it's definitely a lot better to pay less than to have to pay anymore. That's certainly for sure. So that's big news, that that is increasing as much as it is.

Also, want to point out a couple of other things here, and this is straight from Social Security also. This is a summary of their changes. But when it comes to FICA tax, which is how social security is mostly funded, you can see that that's staying exactly the same in 2023 as it was for 2022. This only affects workers. So if you're retired, not working, that doesn't affect you anyways.

Also, what affects workers is that they did increase the maximum table earnings right down here. So in other words, the way that it works with Social Security is if you're working, if you have earnings. You'll have to pay payroll taxes, social security taxes in 2022 on up to $147,000 of your earnings. So if you make 147,000, you have to pay payroll taxes on that full amount. Now, if you only make, let's say a 100,000, you're only paying payroll taxes on the 100,00.

Now, what's happening here is that, in 2023, this limit is being increased. So if you make, let's say $160,200 in 2023, if that's your earnings, you're going to have to pay payroll taxes on that full amount. Okay? Now, if you make more than 160,200, that's the limit. You don't pay payroll taxes on any amount more than that, okay? But that's a pretty big increase, 13,200. So if your income is above these limits, that will affect you in 2023, for sure.

The other key thing that I want to point out here is actually right here, is the earnings test. And so, that applies, if you're not familiar with it, if you're working and you're taking your Social Security benefits and you haven't yet reached your full retirement age, then they could withhold back some of your Social Security benefits depending upon how much you made. So if you're, let's say 62 is an example, in 2022, you were allowed to make up to 19,560 in earnings and they would not withhold your Social Security benefits. But if you made more than this, then, as you can see right there, $1 in benefits is withheld for every $2 in earnings above that limit. Now, this is being increased from 19,560 to 21,240 in 2023, so you can make a little bit more and not have your benefits withheld.

And then, in the year of your full retirement age, but before the month of your birthday, you can make more now. So it used to be, in 2022, it was 51,960, and 2023, it'll be 56,520. So that's a pretty big jump right there, almost $5,000 more. And then they only withhold the dollar for every $3 that you make above that limit. Key thing also to know is once you reach your full retirement age, you can work, make as much money as you want, and they don't withhold your Social Security benefits at all. So those are some of the key things that I think that most of you're going to want to know about.

Other thing I think it's just interesting, that you could see right here, this is the average monthly Social Security benefits in 2023 for all retired workers in 2022, actually, is 1,681, but in 2023 it's going up to 1,827. So these are averages for all retired workers.

So hope this was helpful. If you have questions on any of this, any of these types of changes, let me know. One of the other questions, actually, I do want to address before I wrap this up is I was asked actually this morning, Social Security is making this big cost of living adjustment, should I go ahead and take my Social Security benefits? I'm not taking them now. Should I go ahead and file? And the answer is that you really shouldn't make that choice based upon the cost of living adjustment that they announced because... And I think I have it right here. I could show you if I do. Yep, I've got it here, I think. And this was key because I was on a call earlier. And so, here's what you can do. So the important thing to know, again, this is straight from Social Security, you are eligible for the cost of living benefit increases, it's right here, starting with the year you turn age 62. Okay? This is true, even if you don't get benefits until your full retirement age, or even age 70. We add the cost of living increases to your benefit, beginning with the year you reach age 62. All right?

So hope that makes sense. Whoops. Again, any questions, anything I can help with, let me know. I'll talk to you soon. Take care.


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