Social Security has existed for a very long time. But the program's rules aren't set in stone.
Each year, Social Security tends to undergo changes. Some of those can be positive ones, while others, not so much. Whether you're on Social Security now or years away from being eligible for benefits, it's important to know about these big changes that are set to take place in 2023.
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1. Benefits are getting their largest boost in years
Right now, the average senior on Social Security gets a monthly benefit worth $1,681. Come January of 2023, that average benefit is set to rise to $1,827. We can thank a giant 8.7% cost-of-living adjustment (COLA) for that.
Better yet, in most years, the cost of Medicare Part B tends to rise. That can eat away at COLAs since Medicare enrollees who are already signed up for Social Security have their Part B premium costs deducted from their benefits directly.
But in 2023, the cost of Medicare Part B isn't rising. Rather, it's shrinking. That means more seniors should get to keep their Social Security raises in full.
Before we start celebrating an 8.7% raise, let's also recognize that the reason benefits are climbing so much in 2023 is that inflation has soared this year. If inflation levels fall in 2023, seniors have the potential to gain a nice amount of buying power. But it's too soon to know if that will happen.
2. The earnings-test limit is rising
The Social Security Administration allows seniors to work and collect benefits at the same time. That's a route many people might opt to take in 2023 to cope with inflation.
Once full retirement age (FRA) kicks in, seniors who are working and collecting Social Security simultaneously can earn as much as they'd like without worrying about the impact on their benefits. It's those who are receiving benefits and working before FRA who have to worry about the earnings-test limit.
In 2023, people in that boat will get more leeway in terms of earning money, though. Right now, seniors who earn more than $19,560 ($51,960 for those reaching FRA in 2022) will have some of their Social Security income withheld. Next year, that limit is rising to $21,240 ($56,520 for those reaching FRA in 2023).
3. The wage cap is increasing
Social Security's main source of funding is payroll-tax revenue. Next year, the program might collect more of it from higher earners.
Each year, a wage cap is put in place that dictates how much income individuals pay Social Security taxes on. This year, that limit is $147,000, so earnings beyond that point aren't subject to Social Security taxes. Next year, the wage cap is rising to $160,200, so higher earners will face Social Security taxes on an additional $13,200.
Be aware of changes
Clearly, changes to Social Security can have an impact on seniors and younger workers alike. So it's important to keep track of the different ways Social Security's rules evolve.
The good news is that changes like these are commonly announced each year in October, so that's the best time to be on the lookout for them. It's also a good idea to check up on Social Security toward the end of the year so you can be reminded of any changes that might impact you in the new year.
