Many Americans have large knowledge gaps on the subject of Social Security, according to a survey from the Nationwide Retirement Institute (NRI). Misconceptions about the program may not be a problem for younger adults, but Social Security becomes an increasingly important source of income as people age. Most retired workers depend on benefits to some degree, and Social Security is an indispensable lifeline for millions of seniors. So it's important for those individual to stay up to date on any changes to the program.
Here are three changes to Social Security in 2023 you probably didn't know about.
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Social Security benefits got a big cost-of-living adjustment (COLA)
Social Security payouts receive an annual cost-of-living adjustment (COLA) to protect benefits from inflation, but only 32% of adults know that according to the NRI survey. It stands to reason that those individuals are also unaware that Social Security benefits got a historic COLA of 8.7% in 2023. That was the largest raise for retired workers since 1982, and it came on the heels of the fiercest inflation the U.S. economy has seen in four decades.
The maximum taxable earnings limit increased
The Social Security program is primarily financed by payroll taxes, but not all income is subject to taxation. Only 27% of adults know that, according to the NRI survey.
The maximum taxable earnings limit rises each year to keep pace with changes in general wage levels. The income cap is $160,200 in 2023, up from $147,000 in 2022. Any income above that threshold is not subject to the Social Security payroll tax. That means someone who makes $165,000 per year gets the same tax bill as someone who makes $1 million per year as far as Social Security is concerned.
The retirement earnings limits increased
Individuals who claim Social Security before their full retirement age (FRA) may have some of their benefits withheld if their income exceeds certain thresholds, but only 54% of adults know that, according to the NRI survey.
Like the maximum taxable limit, the retirement earnings limits increase each year to keep pace with changes in general wage levels. In 2023, individuals who are under their FRA for the entire year will have $1 in benefits withheld for every $2 in earnings that exceed the annual limit of $21,240. Similarly, individuals that reach their FRA this year will have $1 in benefits withheld for every $3 in earnings that exceed the annual limit of $56,520.
The maximum Social Security benefit increased
There is a maximum Social Security benefit, but only 56% of adults know that, according to the NRI survey. Those individuals must also be unaware that the maximum Social Security benefit increases each year to keep pace with wage inflation. The biggest payout is $4,555 per month this year, up from $4,194 per month last year.
It's worth mentioning that very few people actually get the maximum Social Security benefit. Doing so requires earning more money than the maximum taxable limit for at least 35 years, and only 6% of workers have earnings above the limit in any given year.
