They say change is a part of life. And sometimes, change can be a good thing.
When it comes to Social Security, though, change is often a mixed bag. The reality is that the program tends to undergo changes every year, and while some of those shifts are positive in nature, others can be the opposite.
Either way, it's important to know what's up with Social Security. This holds true whether you've been collecting benefits for years or are years away from being eligible to sign up.
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Now one thing you probably do know about Social Security in 2023 is that benefits are getting an 8.7% cost-of-living adjustment. That massive raise was brought on by inflation, and the hope is that a boost that large will help seniors regain some of the buying power they lost in 2022.
But while you may have heard about this year's Social Security boost, you may not know about some less obvious changes to the program. So here are three to keep on your radar.
1. The wage cap is going up
Social Security's primary source of revenue is payroll taxes. And if you're a higher earner, you can expect to lose more of your income to Social Security taxes this year.
Every year, the Social Security Administration establishes a wage cap for Social Security tax purposes. Last year, the wage cap sat at $147,000, so earnings beyond that level were exempt from those taxes. This year, however, the wage cap has increased to $160,200, meaning higher earners will have to pay taxes on an additional $13,200 of income.
That may not be the best news. But it's better to know about it than to get caught off guard by a larger tax bill.
2. Social Security work credits require more earnings
Social Security benefits aren't an automatic perk you're entitled to when you're older. Rather, to claim Social Security, you need to accrue 40 work credits in your lifetime, at a maximum of four credits per year.
The value of a work credit can change over time, though. Last year, it took $1,510 in earnings to earn one credit. This year, you'll need to earn $1,640 to score a work credit.
Now, if you work full-time, these details may be pretty meaningless to you since you conceivably earn enough to get your four credits for the year. But part-time workers need to pay close attention to this change.
3. The earnings test limit is rising
The first two changes mentioned here apply to workers who may not be collecting Social Security. This change will impact you if you're receiving benefits and working before having reached full retirement age (FRA).
Last year, you risked having benefits withheld in that scenario for earnings above $19,560. This year, you can earn up to $21,240 without impacting your benefits. From there, you'll lose $1 in Social Security for every $2 of income.
However, these numbers look different in the calendar year you reach FRA. In 2023, if you're working while on Social Security and are reaching FRA at any point up to Dec. 31, you can earn up to $56,520 before impacting your benefits. From there, you'll lose $1 in Social Security for every $3 of earnings. Last year, that threshold sat at $51,960.
Roll with the changes
Change isn't always an easy thing to deal with -- not in life and not with regard to Social Security. But it's important to know about these changes -- and do what you can to work around them if they happen to impact you negatively.
