The big Social Security news this year has been the massive 8.7% cost-of-living adjustment (COLA) that boosted the average monthly benefit by $147. It was the biggest COLA in 40 years and a welcome bonus for the many seniors who have been struggling with high inflation over the last year.
But that's not the only change 2023 has brought to Social Security. Here are three others you may not have heard about.
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1. It takes more to earn a Social Security credit
You accumulate Social Security work credits throughout your career and must have at least 40 to qualify for retirement benefits. The definition of a credit varies by year. In 2022, you only needed $1,510 in earnings to secure one credit. But in 2023, you'll need $1,640.
You can earn a maximum of four credits in one year. This means you must make at least $6,560 in 2023 and earn a minimum of 36 other credits in at least nine other years to claim checks in retirement.
If you don't do this, you may be able to qualify for a spousal Social Security benefit or a survivor's benefit, but you won't be eligible for benefits in your own right. You can check how many credits you currently have by creating a my Social Security account.
2. The wage cap has risen
Contrary to popular belief, the government doesn't assess Social Security taxes on all income. In 2022, you only paid Social Security taxes on the first $147,000 you earned. In 2023, you'll now pay taxes on your first $160,200 in earnings.
If you earn less than $147,000 per year, this rule change won't make any difference. You'll still pay Social Security taxes on all your income in 2023. But high earners will have to pay a little more than they're used to.
3. The program's trust funds are inching closer to depletion
It's no secret that Social Security has been in trouble for a while. The program is spending more money than it's taking in, and it's increasingly had to rely on its trust funds to make up the difference. But this reserve is running out.
The latest Social Security Trustees Report, released in June 2022, estimated that the trust funds would be depleted in 2035. But a more recent Congressional Budget Office report has moved that estimated depletion date to 2032. This could be due, in part, to the large COLA this year, which has increased the program's expenditures even further.
This is still just an estimate, and it doesn't change anything about the program right now. But unless the government comes up with a way to resolve this issue before the trust funds are fully depleted, Social Security could face benefit cuts.
It might not happen, but it's something to be aware of if you plan to rely on Social Security in retirement. Do your best to build a substantial nest egg so you're not as affected by whatever the government decides.
