Social Security recipients should be aware of several important changes scheduled in 2023. The changes will happen automatically and require no action by seniors currently receiving benefits, according to the Social Security Administration. Here are three of the most significant:
A big raise in COLA – Because of surging inflation, and to ensure that seniors can maintain their buying power, the Cost-of-Living Adjustment (COLA) next year will be about 10.8%. For a senior receiving $1661, for example, that will mean a monthly increase of about $180.
An increased wage base limit – Workers pay Social Security taxes each year on income up to a certain limit, called the wage base limit. The wage base limit is linked to the National Average Wage Index (NAWI), which will almost definitely increase. As a result, a larger amount of income is likely going to be subject to Social Security tax next year. In 2022, the limit is $147,000. If you earn more than that, no additional Social Security tax is owed, and no income above this threshold is counted when your benefits are calculated as a retiree.
Delayed full retirement age – Retirees receive a standard Social Security benefit based on average wages. This standard benefit is paid to those who get their first benefits at a designated full retirement age (FRA). The FRA was 65 when the Social Security program began, but thanks to amendments passed in 1983, it is gradually being raised. For those born in 1956, FRA was 66 and four months. For anyone born in 1957, it’s 66 and six months. If you were born in 1958, it’s 66 and eight months, and retirees with a 1959 birthday will have to wait until they are 66 and 10 months old to be eligible for standard benefit. Finally, anyone born in 1960 or after is going to have to wait until 67 to avoid seeing their checks reduced due to early filing.