Social Security is one of the most important government programs for older Americans. With tens of millions of people receiving regular monthly checks from the program, there are many for whom financial planning in retirement would look a lot different without Social Security.
As the end of the year approaches, Social Security recipients need to be prepared for big changes in the program. While some of the changes are positive, others could have a mixed impact on your nest egg. Here is what you need to know about Social Security in 2023.
Seniors will get an 8.7% COLA
A big boost in Social Security benefits is on the way.
The Social Security Administration announced that the cost-of-living adjustment, or COLA, will increase by 8.7% in January. That’s the biggest increase since 1975 and means seniors will see their higher payments arrive in January.
The average benefit among all retired workers will rise by $146 to $1,827 per month after the COLA takes effect. Couples in Iowa where both spouses receive benefits should see a $238 average COLA boost to $2,972, while a widowed parent with two children could see a $282 increase to $3,520. A surviving spouse without children could see a benefit rise of $137 to $1,704 per month.
Social Security Maximum Benefits
If you’re planning to retire in 2023, you’ve got some great news coming your way—and it’s not just that you’ll be able to get up when you want and go on vacation whenever the mood strikes.
The Social Security Administration has announced that monthly benefits will increase as a result of an increase in payroll taxes. Those who retire at age 62 will see a maximum of $2,572 per month in benefits, up $208 from 2022.
Gains for others will depend on when they retire. The biggest boost will be available for those who wait until age 70 to retire in 2023, with the maximum jumping $361 to $4,555 per month. Those retiring at 65 will see the maximum rise by $286 to $3,279, while gains of $266 and $240 will apply for those retiring at 66 and 67 respectively.
Payroll Taxes For Social Security will Increase
For the past few years, Social Security has been collecting payroll taxes on a maximum amount of earnings that was set at $128,400. That number is going up in 2023, and so are the payroll taxes that are collected on it.
The wage base determines the maximum amount of earnings on which the government collects payroll taxes, and that number got a $13,200 boost to $160,200 for 2023.
The net result is that employees making above the $160,200 amount will have an extra $818.20 withheld from their paychecks during 2023. Those who are self-employed could have to pay twice that amount in extra tax, or $1,636.40. For most workers, though, the change won’t matter, because only a small fraction of Americans make anywhere near the $160,200 maximum wage base.
Full Retirement Age will Not Change
In 2023, Social Security will be a little bit different for seniors than it is today.
First of all, there are some new changes to how benefits are calculated that will affect everyone who is 62 or older. The full retirement age (FRA) has slowly been going up, but it hit 67 for those born in 1960 or later. As a result, those who are filing for early benefits at age 62 in 2023 will have the same FRA as their year-older peers in 2022.
This means that anyone who is already eligible to receive Social Security payments should take advantage of this opportunity so that they can collect maximum benefits—and it’s important for retirees to know about any changes ahead of time so that they can plan accordingly!
2023 is looking up for many retirees, especially if you’re looking to save. If you already have a retirement plan that takes your Social Security benefits into account, that’s great! You’re one step closer to ensuring your assets last throughout your lifetime.
If you’re looking for a way to make the most of your time in retirement, you’ve come to the right place. At Johnson Wealth and Income Management, we have the experience and expertise to help ensure that your assets last throughout your lifetime.
We know that retirement planning is a process, and we’re here to guide you through it every step of the way. We can help you work towards achieving all your financial goals, so you can enjoy a worry-free retirement.
If you’d like more information on how we can help, reach out today!
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