With a program that’s been around as long as Social Security, it’s pretty easy to grow complacent and assume there’s no need to keep tabs on things. After all, how much could really change with Social Security from one year to the next?
Actually, a lot.
Many of Social Security’s basic rules have not shifted at all in 2023. For example, you’ll still be penalized in the form of a reduced benefit for signing up to collect your money before reaching full retirement age. And you’ll still be rewarded with a higher monthly benefit by delaying your filing past full retirement age.
But in other regards, Social Security has changed in a really big way in 2023. Here are some pretty major shake-ups you should know about.
1. Benefits got an 8.7% boost
For years, seniors on Social Security have bemoaned the fact that their cost-of-living raises do a poor job of keeping up with inflation. This year, benefits finally got a sizable enough lift to potentially allow recipients to gain buying power, or at least maintain their buying power compared to the previous year.
Of course, the whole reason for this year’s 8.7% cost-of-living adjustment was rampant inflation in 2022. Living costs are still notably elevated this year, but the annual rate of inflation has been slowing. So ideally, that will put at least some Social Security recipients in a position where they’re finally able to shore up their finances to some degree.
2. Social Security is potentially taking more of your paycheck
You might assume you don’t need to concern yourself with Social Security until you’re ready to start collecting benefits. But remember, when you work, you pay into the program in the form of Social Security taxes. And this year, if you’re a higher earner, your tax burden will be greater.
Every year, a wage cap is put into place with regard to Social Security taxes. Last year, wages beyond $147,000 were exempt from those taxes. But this year, the wage cap has been raised to $160,200, which means if you earn a lot, you’re going to lose more of your money for tax purposes.
3. It’s getting harder to qualify for Social Security in the first place
Collecting Social Security later in life is by no means a given. You have to pay into the program and earn a certain amount of wages through the years to qualify for work credits.
Specifically, you need 40 lifetime work credits to be eligible for Social Security, and you can only accrue four credits per year. Meanwhile, the amount of earnings needed to snag a single credit has increased. Last year, $1,510 of income got you a Social Security credit. This year, it takes $1,640.
Now, if you’re someone who’s in the position of having to pay Social Security on more income this year due to the higher wage cap, then these are numbers you don’t have to consider, as you’re clearly earning enough to snag your four credits for 2023. But if you work part-time, be mindful of this change.
It’s easy to assume that Social Security is a program that will always stay the same. But you may be surprised at how many shifts it goes through year after year. And those changes might impact you even if you’re nowhere close to collecting benefits, so it definitely pays to make sure you’re in the know.