2023 Social Security COLA – 8.7%
Gabe Fransen | December 14, 2022
Approximately 70 million Americans will see their Social Security and Supplemental Security Income increase 8.7%. Increased benefits will begin in January of 2023. Here are some additional facts related to the 2023 COLA adjustment:
- The maximum amount of earnings subject to the Social Security tax will increase to $160,200
- The earnings limit for workers who are younger than Full Retirement Age will increase to $21,240
- $1 deducted from benefits for each $2 earned over the limit
- The earnings limit for people reaching their Full Retirement Age in 2023 will increase to $56,520
- $1 deducted from benefits for each $3 earned over the limit until the month the worker turns Full Retirement Age
- There is no limit on earnings for workers who are Full Retirement Age or older for the entire year
This benefit increase, on average will be put an extra $140 per month in recipients pockets. This increase, in addition to Medicare premiums going down is expected to give seniors more peace of mind and some financial breathing room given the inflation that has impacted most sectors over the last 16 months. 2023 is the first time Medicare premiums have decreased year over year since 2012 when they went from $115.40 in 2011 to $99.90 in 2012.
The purpose of the Cost Of Living Adjustments is to ensure that purchasing power of Social Security and Supplemental Security Income benefits are not eroded by inflation. The adjustments are based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA for the next year.
You are allowed to begin collecting Social Security at age 62, on a reduced benefit compared to what you would get monthly by waiting until your Full Retirement age. You can also wait longer, until age 70, for the highest possible monthly benefit.
As financial planners, we look at how you can maximize your Social Security benefits. We typically suggest waiting until a later time to start Social Security benefits instead of starting the benefits at the earliest available time. This is especially the case while you are still earning income as you receive less than you’re eligible to collect, but if you wait, your benefits will continue to increase for later years when you don’t have earned income.
There are many factors to consider when deciding when to start taking Social Security benefits beyond your age and when you stop working. Your investments, other retirement accounts, and the rate at which they’ll be taxed need to be considered in addition to any other incomes that you and your spouse may have during retirement. You also want to consider general health, life expectancy, an inflation adjusted spending plan and desired lifestyle through the Go-go, Slow-go and No-go stages of post working years.
Cost-of-Living Adjustment (COLA) Information 2023 http://ssa.gov/cola