Social Security is Changing in 2023 – Here’s What You Need to Know

Senior citizens currently taking advantage of their Social Security benefits may experience the following changes set to take place in 2023. These changes aren’t due to a large legislative move but rather serve as automatic, built-in modifications to the program itself. Future and current retirees alike should be made aware of these pending changes and how they could alter their retirement plans. Let’s look at the upcoming changes and determine how they will affect your benefits moving into next year.

Cost-of-living adjustments are made to Social Security recipients periodically, depending on an increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. This increase is meant to assist senior citizens on a fixed income with paying for basic needs, including utilities, groceries, and more. Considering the surge of inflation this year alone, retirees are likely to receive a large COLA compared to previous years. Some say the 2023 benefits increase could mean a 10.8% increase, for an average benefit of $1,661 more per year.

The wage base limit is also getting an increase in 2023. When workers pay Social Security taxes, they only pay a certain amount of their income, which is known as the wage base limit. Currently, the limit rounds up to $147,000; however, those who earn above this dollar amount will not owe additional Social Security taxes. This calculation is based on the National Average Wage Index or NAWI. As it increases in 2023, a larger amount of wage-earning citizens will now be subject to paying Social Security taxes for the following years.

The future of working retirees is also about to change, increasing the threshold of earnings allowed while collecting Social Security benefits. Currently, those in retirement are subject to a small and temporary forfeiture of their benefits, which only applies to those working before they’ve reached full retirement age. Adjustments to thresholds must occur periodically, especially when there is a surge in inflation. Senior citizens will be pleased to know they will soon be poised to earn higher wages before they are penalized by this new rule.

The full retirement age at the creation of the Social Security benefits program was 65 and remained in effect for many years. However, once amendments passed in 1983, the FRA was officially increased. Now the FRA is receiving an update, sufficiently increasing the age to 67 for those born after 1960. Essentially, for individuals turning 66 in 2023, there will be an additional two-month wait than this year’s 66-year-old citizens experienced for a standard benefit. To avoid a benefit reduction, it’s crucial to ensure you don’t retire early and make sure you pay attention to the new age requirements soon to be released.

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