Six Social Security changes are currently in effect. According to The Motley Fool, these range from what beneficiaries are paid to what workers could owe in the payroll tax.
Changes in Social Security, Here Are Six Changes That Take Effect Today
Social Security has held to its name and provided some degree of financial security for our nation’s retirees for more than eighty years. The Center on Budget and Policy Priorities declared that the program pulled nearly 22.5 million people out of poverty in 2020 which includes 16.1 million adults aged 65 and over.
This goes to show that Social Security isn’t static and is designed to change over time. As 2023 begins here are 6 Social Security changes that take effect today.
1. Historic Boost in Social Security Checks
The historically large cost-of-living adjustment (COLA) is considered to be the most-anticipated change. It is being recognized in the January payouts sent to nearly 66 million beneficiaries.
Over the past year, Social Security’s COLA is a way for the program to account for the inflation that its beneficiaries have contended with. The most ideal move is the increase benefits on par with the rate of inflation so recipients (mostly senior citizens) don’t lose purchasing power. Beneficiaries will see an 8.7% increase in their Social Security checks in 2023.
2. A Rise In The Maximum Monthly Payout At Full Retirement Age
The new year brings with it the opportunity to receive a much beefier monthly benefit check if you’re a lifetime high-earning retiree.
The maximum monthly payout a retired worker could receive at full retirement age (the age where eligible beneficiaries qualify for 100% of their payout) was $3,345 last year. The maximum monthly benefit at full retirement age will jump by $282 to $3,627 in 2023 thanks to a rapidly rising inflation rate.
For a maximum monthly benefit, three criteria need to be met:
- To claim benefits, a retiree has to wait until their full retirement age (usually age 66 to 67).
- They’ll have to work at least 35 years since the Social Security Administration (SSA) uses a worker’s 35 highest-earning, inflation-adjusted years when calculating their monthly benefit at full retirement age.
- There is a need to reach the maximum taxable earnings cap in each of the 35 years used by the SSA in the monthly benefit calculation.
3. High-Earning Workers May Face a Larger Tax Bill
Those who are considered as a high-earning worker there is a bigger chance for you to be on the hook for a bigger tax bill this year. Almost 90% of the more than $1 trillion in revenue collected by Social Security every year comes from the 12.4% payroll tax on earned income.
You and your employer split this tax liability down the middle if you work for someone else or a company. The bonus of this 12.4% tax falls entirely on you if you’re self-employed.
4. Qualifying For Social Security Benefits Just Became a Little Tougher
Social Security isn’t an entitlement you receive for simply being a U.S. citizen but you earn your benefit by working. To qualify for these benefits you’ll need to amass 40-lifetime work credits. This may seem hard buy workers can earn a maximum of four credits each year. This means they can hit the threshold to qualify for retirement benefits in as little as 10 years.
5. Disability Income Thresholds Are On The Move
The disability income thresholds represent another big change that officially takes hold today.
When the topic is Social Security most people think about the more than 48 million retired workers, and the 2.7 million spouses and children of these retirees, who receive a monthly benefit. But Social Security also plays a key role in supporting the long-term disabled. 8.88 million disabled workers were receiving a monthly Social Security check that averaged $1,364.
6. Early Filer Withholding Thresholds Are Increasing
The final change in Social Security that takes effect today can impact retired workers who began receiving a Social Security check before reaching their full retirement age.
Social Security encourages patience from eligible beneficiaries and tends to punish early filers in a variety of ways. One of those ways is the retirement earnings test. The retirement earnings test allows the SSA to withhold some or all of an early filer’s Social Security benefit if they generate too much-earned income.
Something important to note here is that the retirement earnings test is no longer applicable once you hit your full retirement age, regardless of when you began taking benefits. After age 66 to 67, depending on your full retirement age, the SSA won’t be able to withhold a penny of what you’re due, regardless of how much you earn.