In 2023, an estimated 67 million Americans will receive Social Security benefits. For those who received benefits in 2022 or who are planning on retiring in 2023, it’s critical to know how the program changed this year. That ensures you can account for shifts in your income or expenses, allowing you to budget more effectively.
As is true in essentially every year, there are some notable adjustments to Social Security in 2023. Here’s a look at the biggest Social Security changes in 2023.
Cost of Living Increases
Generally, Social Security benefits are designed to keep pace with inflation, and they’re essentially tied to the Consumer Price Index (CPI). Since 2022 saw record-setting inflation levels, the annual cost-of-living adjustment (COLA) for Social Security for 2023 is higher than in most years.
Social Security recipients get an 8.7% COLA in 2023, so beneficiaries will broadly see an increase in their monthly payments. That’s the highest increase since 1981 when the COLA increase was 11.2%.
On average, January 2023 Social Security checks were $146 higher than those in December 2022. Across an entire year, that means an increase of $1,752 for the average beneficiary. However, the exact amount a person receives varies depending on their prior year’s monthly benefit, so it’s critical to keep that in mind.
Benefit Increases
Along with the COLA increases, the maximum Social Security benefit in 2023 for those retiring at full retirement age is also rising. In 2022, the maximum was $3,345 per month or $40,140 per year. For those who retired at age 70 in 2022, the maximum benefit was $4,194 per month or $50,328 per year. If a person retired early at age 62 in 2022, the maximum amount was $2,364, or $28,368 per year.
In 2023, the maximum went up to $3,627 per month or $43,524 per year. For those who retire at age 70 in 2023, the maximum benefit is $4,555 per month or $54,660 per year. If you retire at age 62 in 2023, the maximum benefit is $2,572 per month or $30,864 per year.
Medicare Offsetting
In 2022, Medicare Part B premium increases offset the COLA increase that year, causing many Social Security beneficiaries to see their monthly income checks shrink. However, in 2023, that isn’t occurring. Instead, Medicare Part B premiums are actually decreasing. Couple that with the high COLA increase, and Social Security income amounts are rising.
In 2023, Medicare Part B standard monthly premiums are dipping to $164.90 per month, which is $5.20 less than 2022 rates. Additionally, high-earning Medicare Part B enrollees may also see premiums decline, as the starting rate is moving down to $230.90 per month in 2023, which is lower than the 2022 rate of $238.10.
Higher Tax Thresholds
Primarily, funding for Social Security comes from taxes on work earnings, the costs of which are often shared by employers and employees. While the tax rate hasn’t changed in 2023, the amount of your income that is subject to these taxes is rising in 2023.
In 2022, income up to $147,000 was subject to Social Security taxes. In 2023, that threshold is rising to $160,200. As a result, higher earners who make more than $147,000 annually may owe more in Social Security taxes than in previous years.
