As the New Year starts, it’s important to know what’s up with Social Security.
Social Security Changes You Need to Know
When there are changes in Social Security, you are the first one that needs to know about it. The program is constantly changing every year and you need to know how it will affect you. As stated in a post by The Motley Fool, the benefits are getting an 8.7% cost-of-living adjustment. Due to the effects of inflation, the raise was done in hopes of boosting seniors to help them regain some of the buying power they lost in 2022. Even though this was made public, you still need to dig deeper to fully understand the changes done to Social Security.
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1. Higher Wage Cap
Social Security mainly relies on payroll taxes. This means that high-income earners can expect to lose more of their income to Social Security taxes this year. The SSA annually establishes a wage cap for Social Security tax purposes. The wage cap last year was $147,000 meaning that earnings beyond that level were exempt from those taxes. However, the wage cap this year increased to $160,200. This means that higher earners will have to pay taxes on an additional $13,200 of income.
2. A Higher Earning Requirement for Social Security Work Credits
When you retire, you automatically become entitled to Social Security benefits. This means that if you are to claim those benefits, you need 40 work credits in your lifetime, at a maximum of four credits per year. Work credit values change annually. Last year, you need to earn $1,510 for one credit and this year you need to earn $1,640 to score a work credit.
3. Rising Earnings Test Limit
The first 2 changes apply to workers who may not be collecting Social Security. This third change will impact you if you’re receiving benefits and working before having reached full retirement age (FRA). You risked having benefits withheld in that scenario for earnings above $19,560 last year. For 2023, you can earn up to $21,240 without affecting your benefits. After that, you will lose $1 in Social Security for every $2 of income.
These changes are constant when it comes to Social Security. All you have to do it be aware and adapt well to them as quickly as possible.
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