Some people don't like change. They opt to live in the same home for years because they don't want the upheaval of moving and learning their way around a new neighborhood. And some people refuse to adapt to certain technologies because they're used to doing things a certain way -- for example, sending in a paper tax return, even though it's super easy and more efficient to file one electronically.
When it comes to Social Security, change is something that beneficiaries and workers alike have to get on board with. That's because the program commonly undergoes changes on a yearly basis that can impact not only seniors, but also workers who are decades away from being eligible for benefits. With that in mind, here are three big Social Security changes that are happening in 2023.
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1. Benefits are getting a massive boost
You've probably noticed that just about all of your bills are more expensive these days, due to inflation. That's not a great thing. But since inflation has surged so much this year, it's paved the way for Social Security recipients to get their largest raise in decades.
In 2023, Social Security benefits will be eligible for an 8.7% cost-of-living adjustment (COLA). That should take the average monthly benefit up from $1,681 to $1,827.
What makes this 8.7% COLA even more helpful is that for the first time in years, the cost of Medicare Part B isn't rising. Rather, it's shrinking.
Seniors who are enrolled in Medicare and Social Security at the same time have their Part B premium costs automatically deducted from their benefits. When the cost of Part B rises, seniors end up with a smaller COLA (and sometimes no COLA at all). But since the cost of Part B is dropping in 2023, Social Security recipients on Medicare should be able to keep their COLAs in full.
2. The wage cap is rising
Maybe you're nowhere close to being able to sign up for Social Security. Even if that's the case, one big change that's coming in 2023 might cost you more money in payroll taxes.
Payroll taxes are Social Security's main source of revenue. If you're a higher earner, you may have noticed that you don't pay Social Security taxes on all of your income. Instead, there's a cap that's put in place every year.
This year, Social Security taxes don't apply to wages above $147,000. But in 2023, the wage cap is rising to $160,200, so higher earners will be subject to Social Security taxes on an additional $13,200 of income.
3. Social Security credits are getting more difficult to earn
Seniors aren't automatically entitled to Social Security once they reach a certain age. Rather, eligibility hinges on earning enough money in your lifetime and paying into the program accordingly.
To qualify for Social Security in retirement, you must earn a total of 40 work credits in your lifetime, at a maximum of four credits per year. This year, a single work credit is worth $1,510 of earnings. Come 2023, it will take $1,640 of earnings to earn one credit.
Because you can only earn a maximum of four credits in 2023 (or any year, for that matter), this higher threshold isn't really going to impact you if you work full-time. But if you're a part-time employee with a lower wage, it's definitely something to be mindful of.
Whether you're the type who enjoys change or not, the reality is that Social Security is going to look very different in 2023. Keep these changes on your radar now so you can prepare for them and avoid getting thrown for a loop.
