6 Major Overhauls Impacting Social Security in 2023.The year 2023 brings about several notable transformations to the Social Security program, with much of the focus centered around the most substantial cost-of-living adjustment (COLA) in over four decades. While the new COLA has a direct impact on payments to Social Security beneficiaries, it’s just one facet of the comprehensive changes unfolding this year.
6 Major Overhauls Impacting Social Security in 2023
Undoubtedly, the most significant development of 2023 is the initiation of an 8.7% surge in the Social Security COLA, marking the most substantial increase since the 11.2% upswing observed in 1981.
This notable rise in the COLA can be attributed to the soaring inflation rate, the highest in 41 years. Consequently, the average monthly Social Security payment for retired workers has experienced a notable increase, reaching an estimated $1,827 from the previous $1,681, constituting a noteworthy $146 per month gain.
Impacting Social Security in 2023
Effective from January 2023, the new payment amount has been implemented for all Social Security beneficiaries, while Supplemental Security Income (SSI) recipients experienced the change starting from December 30, 2022. However, it’s important to acknowledge that the 8.7% COLA of 2023 won’t be universally applicable to all Social Security recipients.
Variation in payment increases arises due to diverse factors, including the primary insurance amount (PIA) and the timing of Medicare enrollment. The Social Security Administration (SSA) has dispatched COLA notices to beneficiaries, outlining the specifics of the updated payment amounts.
Enhanced Social Security Disability Thresholds
The SSA disburses monthly benefits to individuals incapacitated from working for a year or more due to disability. Typically, these benefits persist until recipients are able to resume regular employment.
Nonetheless, circumstances might arise where a qualifying disability persists even while the individual is still employed, particularly if they’re unable to perform their prior job duties due to a medical condition. In such scenarios, eligibility extends only up to a certain income threshold. Exceeding this threshold renders the individual ineligible for a qualifying disability. The following table illustrates the threshold modifications for 2023, based on average monthly earnings:
|Category||2022 Threshold||2023 Threshold|
|Trial Work Period (TWP)||$970/month||$1,050/month|
Increase in SSI Federal Payment Standard
Beneficiaries of Social Security who also meet the criteria for Supplemental Security Income (SSI) benefits witness an elevation in the maximum Federal SSI payment amounts for 2023, corresponding to the 8.7% COLA. Individually, the standard has risen to $914 per month from $841 in 2022. For couples, the payment has escalated to $1,371 per month in 2023, up from $1,261 in 2022.
Augmented Maximum Benefits for Full Retirement Age Retirees
Retirees who choose to retire at the full retirement age—either 66 or 67, depending on their birth year—experience an increase in their maximum benefits for 2023. The maximum monthly benefits have surged from $3,345 in 2022 to $3,627 in 2023.
Expansion of Maximum Taxable Earnings for Working Individuals
Individuals who receive paychecks are familiar with the Social Security tax deduction. There exists an annual earnings cap subject to Social Security tax, referred to as the maximum taxable earnings. For the year 2023, this cap has risen to $160,200, a significant increase from $147,000 in 2022.
Adjustment to Earnings Test Exempt Amounts
Social Security benefits are withheld if the recipient’s earnings surpass a certain threshold and they are below the full retirement age (FRA). This threshold, known as the retirement earnings test exempt amount, is subject to change.
Under this alteration, two distinct exempt amounts apply: a lower value in years preceding the FRA year and a higher value in the year of reaching FRA. For individuals below the full retirement age, the earnings test exempt amount has increased to $1,770 per month in 2023, up from $1,630 per month in 2022. Individuals who have reached the full retirement age now have an exempt amount of $4,710 per month in 2023, compared to $4,330 in 2022.
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