Keep these in mind as we enter the new year.
Despite being in place for decades, the Social Security program is subject to periodic revision. Unfortunately, the results of these shifts are only sometimes positive.
Let’s first discuss some positive news. First, an 8.7% cost-of-living adjustment (COLA) will be made in 2023, giving Social Security recipients their greatest increase in decades. A boost of that magnitude is expected to aid seniors in regaining some purchasing power in the face of inflation and help them avoid some of the difficulties they could have had this year.
The Social Security system will soon undergo yet another improvement. The maximum income threshold is increasing. Thus, early Social Security filers who continue to work need not worry about having their benefits lowered due to their higher income.
While most of Social Security’s 2023 changes are positive, some beneficiaries may find the new rules unsettling. Listed below are a couple of things that could be detrimental to your situation.
1. A Salary Cap Increase
Payroll taxes are the main funding mechanism for Social Security. However, workers may only sometimes pay taxes on all of their earnings.
An annual salary ceiling limits how much money can be taxed. The maximum taxable pay is $147,000, meaning all income over that amount is not subject to Social Security taxes. Income over that amount is not counted when figuring out your monthly retirement payments.
The pay cap is significantly increasing for the upcoming year. Earnings over $160,200 are exempt from Social Security tax. That represents a significant increase over this year, which implies that people with higher incomes will lose more of it.
Of course, it might be difficult to feel sorry for those whose salaries are sufficiently substantial to be affected by this shift on the one hand. However, in other areas of the country, $160,200 is a little, especially for families with several children. In conclusion, many individuals prefer something other than this adjustment.
2. A Higher Salary Threshold for Earning Work Credits
After a certain age, seniors are still determined to begin receiving Social Security payments. You must accumulate 40 work credits over your lifetime—a maximum of four per year—to be eligible for benefits.
The worth of a work credit can fluctuate over time. For example, you can get one work credit for every $1,510 income. However, one labor credit will cost $1,640 in 2023.
Those already working full-time will likely not notice any adverse effects from this shift. However, suppose part-timers want to ensure they receive the maximum credits in 2023. In that case, they may need to increase their hours or advocate for better pay.
Pay Attention to the Upcoming Social Security Reforms.
People’s financial situations may improve or worsen depending on how Social Security rules change. Take note that Social Security goes through annual changes. Therefore, you may be significantly affected even if you are still at retirement age.
Contact Information:
Email: [email protected]
Phone: 4022508277
Bio:
Carl Wyllie is an advisor focused in areas of Medicare, retirement, estate planning, and crisis planning. Carl works with individuals of all ages in planning for their retirement. He is uniquely effective in building working relationships between their families and elder care law attorneys to assist them in avoiding a healthcare crisis. Carl is particularly sensitive to helping provide the means for his clients to maintain their independence and dignity when a change in their health occurs due to the natural aging process.
