It’s no surprise that due to the rising level of inflation this country is experiencing, the Social Security COLA, or cost of living adjustment, is staggering. Other Social Security 2023 changes beyond COLA are also on the way.
For 2023, people receiving social security will see an 8.7% increase in COLA. This means that if you raise $2,000 per month in 2022, next year you will see that number rise to $2,174 per month.
In addition, there will also be an adjustment for tax purposes next year when it comes to contributing to social security. In 2022, the threshold for contributing to Social Security is $147,000. This number is also called the taxable minimum – but it really means that it is the amount of your income that is subject to Social Security tax. Anything you earn above this amount is not subject to additional Social Security taxation.
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In 2023, this threshold increases to $160,200. So next year, the first $160,200 of your income will be taxed for Social Security at a rate of 7.65%.
It is also important to note that if you have not reached Full Retirement Age (FRA) and are still working, you will have $1 in benefits withheld for every $2 in income you earn above. over the income limit. In 2022, this amount is $19,560 and in 2023, it will increase to $21,240 in income.
To complicate matters further, the year an individual reaches their FRA, the income limit increases from $51,960 per year to $56,520 per year. This only applies to earnings for the months prior to obtaining your FRA. $1 of benefits will be withheld for every $3 of earnings over this limit. The good news is that the month after reaching your FRA, there is no discount.
Do these changes alter your plans?
As financial planners, we often advocate not taking your Social Security benefits while you’re still earning income because you’ll receive less than you’re entitled to, but if you wait, your benefits will continue to be paid. increase during the years you gain. ‘t win later.
Although you can start collecting Social Security at age 62 with a reduced benefit, you can wait until age 70 for a full benefit. If you’re over 70, there’s no additional benefit to expect, as you’ve already gotten as much benefit as possible.
When determining when to take out your own social security, there are many factors to consider beyond your age and when you stop working. Consider your investments and the rate at which they will be taxed, in addition to any other fixed income you may have in retirement.
You will also want to consider your overall health and life expectancy. Your spouse, their age and their own social security will also play a role in this equation.
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