Social Security Update 2023 | 7 MASSIVE Changes to SS, SSI, SSDI in 2023
What is going on my friends? In this topic, we’re gonna talk about Social Security, SSI and SSDI benefits and seven massive changes coming for Beneficiaries this new year 2023. Social Security is our nation’s most successful retirement program. In 2020, it was responsible for pulling nearly 22.5 million people out of poverty.
And according to a recent survey from a national pollster, it is vital to helping just shy of 90% of retirees make ends meet during their golden years. Social Security is also a program that undergoes changes on a regular basis. During the second week of every October, for example, the Social Security Administration releases a fact sheet detailing the changes that will impact beneficiaries and the workers paying into the program in the upcoming year. You can do me a giant favor by tapping those like and subscribe buttons and let’s get into this breaking news update regarding the latest Social Security benefits information. This information changes on an almost daily basis and it’s my job to keep you informed with the latest updates.
So make sure you watch every single topic and watch all the way through so you don’t miss out on the most current information. And without further ado, let’s get into these seven major announcements for Social Security beneficiaries that you will absolutely want to look out for. The first announcement to make is that beneficiaries will receive their largest raise in 41 years. This one is probably already obvious to most of you already since your cost of living adjustments were already applied about a week ago. Effective December 30 for SSI and January 1 for all other Social Security recipients.
As you know, Social Security’s nearly 66 million beneficiaries received a whopping 8.7% raise. Notice how raise is in quotation marks to reflect that this benefit increase is only intended to match inflation and isn’t the same as a pay raise you’d receive from an employer which would allow you to not only match, but get ahead of the prevailing inflation rate. On a percentage basis, this 8.7% Cola is the biggest year over year increase in 41 years and the fourth largest since the CPIW became the program’s inflationary tether in 1975. In nominal dollar terms, it will be the biggest increase in history. The average retired worker is estimated to see their monthly benefit climb by $146 in 2023 to approximately $1,827.
But before breaking out the champagne, consider that a sizable portion of this Cola is being gobbled up by historically high inflation. Additionally, the purchasing power of Social Security dollars has declined by an unsightly 40% since 2000. In other words, Social Security’s cost of living adjustment isn’t all what it’s cracked out to be. And this leads to our second announcement on our list high earning workers will have to open their wallets a bit wider. It’s not just beneficiaries who are impacted by Social Security’s annual changes.
High earning workers are going to be on the line for more taxable income in 2023. This year, Social Security’s 12.4% payroll tax on earned income, which includes wages and salary but not investment income, was applicable. Between self employed pay, the entirety of this 12.4% payroll tax up to $147,000. While workers employed by a company split this tax liability down the middle with their employer, the payroll tax provides Social Security with the lion’s share of its revenue. The maximum taxable earnings cap, the $147,000 figure adjusts in lockstep with the national average wage indexed most years.
With workers enjoying substantial wage pricing power, the maximum taxable earnings cap will rise from $147,000 in $2022 to $160,200 in 2023. For the 6% of workers who bring home more than $147,000 in earned income annually, this change could translate into as much as $1,636.0.80 in added payroll tax liability next year. Moving on to announcement number three. The rich are getting richer thanks to a beefier maximum payout. However, it’s not all bad news.
Being a high earner next year, the maximum monthly payout at full retirement age, the age where eligible beneficiaries qualify for 100% of their retirement benefit is skyrocketing higher. Following a $197 per month increase in $2022 to $3,345. Lifetime high earners will see the maximum benefit at full retirement age jump from $282 per month to $3,627. For those of you keeping score at home, that’s over $43,500 per year. But in order to receive this maximum monthly payout from Social Security, three criteria need to be met.
A worker would need to number one, wait until their full retirement age before taking benefits. Number two work at least 35 years since the Social Security Administration takes into account a worker’s 35 highest earning, inflation adjusted years when calculating their monthly retirement benefits. And number three, hit or surpass the maximum taxable earnings cap in all 35 years considered by the Social Security Administration. In fact, only around 2% of workers end up qualifying for the maximum monthly payout at full retirement age. Number four is withholding.
Thresholds for early Filers are increasing Social Security is a program that incentivizes patients. Retirees who begin receiving their benefits prior to reaching full retirement age between ages 62 and 66 generally are hit with a number of penalties. As an example, monthly payouts are permanently reduced for early filers. Additionally, beneficiaries can be exposed to the retirement earnings test, which allows the Social Security Administration to withhold some or all of recipients payouts if they earn above preset income thresholds. For instance, early filers who won’t hit their full retirement age this year can have $1 in benefits withheld for every $2 in earned income above $19,560, or about $1,630 per month.
For early filers who will hit their full retirement age in 2022. $1 in benefits can be withheld for every $3 in earned income above $51,960, or about $4,330 per month in 2023. These income thresholds are increasing, which means early filers can pocket more earned income without having some or all of their benefits withheld early filers who won’t reach full retirement age can earn $21,240, or about $1,770 per month next year without any withholding kicking in. Meanwhile, early filers who will reach their full retirement age can net up to $56,520, or about $4,710 per month, before any withholding begins. The retirement earnings test is no longer applicable once a beneficiary reaches full retirement age.
All right, moving on to number five. Disability income thresholds are climbing. The second week of October is also historically good news for the disabled workers and their families, who rely on a monthly payment from the program. As of September, roughly 8.95 million people were receiving a disability benefit, 7.7 million of which were disabled workers. In 2022, nonblind disabled workers were allowed to bring in $1,350 endurance income without having their benefits stopped.
But now that we’re in 2023, these same folks will be able to generate $1,470 per month endurance income before their benefits would cease. That’s up to an extra $1,440 in annual income. The earning threshold is moving up sizably for blind disabled workers, too. This year, the monthly earnings cap before benefit cease is $2,260 per month. In 2023, it will rise to $2,460 per month.
Number six. Wow, you guys are some great listeners. To make it this far. Number six is the bar to qualify for Social Security benefits is moving up. Something you might not realize about Social Security is that you’re not automatically entitled to a benefit just because you’re an American citizen.
To receive a retirement benefit as well as survivor and disability coverage, you’ll have to earn work credits. A total of 40 lifetime work credits is needed to receive Social Security benefits, of which a maximum of four can be earned annually. While this might sound like a lot of work, it really isn’t. In 2022, a word credit was granted for each $1,510 in earned income. Thus, a worker who generates $6,040 in earned income will receive the maximum of four lifetime credits this year.