Ninety-seven percent of retired U.S. citizens have explained that they have already noticed the effect of inflation on their spending, a survey by The Motley Fool estimates. In this survey, moreover, 85% of people say that inflation is causing them to have to stretch Social Security payments during these tough economic times.
But it appears that Social Security payments will have big changes in 2023 and that these will positively affect retirees who receive a check from the Social Security Administration. Starting in January, payments to retirees will change.
In January 2023, retirees will see their benefits increase by 8.7% thanks to a cost-of-living adjustment (COLA), which next year will be historic as it will be the largest in more than 40 years. Thus, beneficiaries will receive an average of $146 more each month. All retired workers who are receiving Social Security benefits will receive this increase beginning in January 2023. In addition, the COLA also applies to Supplemental Security Income (SSI), in addition to other types of benefits such as spousal or divorce benefits.
How to Earn More Money Without Reducing Your Social Security Benefit
To get a higher monthly payment, many retired workers choose to continue to work after claiming Social Security benefits. This can be a wise decision in some situations, but if you have not yet reached full retirement age, your benefits may be reduced depending on your earnings.
The annual earnings limit is the amount you can earn before you face a reduction in benefits. face a reduction in benefits. If you earn more than this limit, a portion of your benefits will be temporarily withheld until you reach your FRA.
The income limit if you are below the FRA is as follows:
- 2022: $51,960 per year
- 2023: $56,520 per year
If you work after collecting Social Security, a higher earnings limit means you will be able to earn more before your benefits are reduced. This means you will be able to keep more of your paychecks after January 2023.
Salary cap to increase substantially in 2023
Workers contribute to the Social Security program through payroll taxes. These taxes are what fund retiree benefits. But workers do not have to pay payroll taxes on all the income they receive. The wage cap establishes how much of their earnings will be subject to Social Security taxes.
During 2022, the wage cap is $147,000 per year. Earnings above this limit will not be subject to tax. But in 2023, the annual cap will increase to $160,200 per year.
If you earn between $147,000 and $160,200 annually, it is very likely that your attorney’s tax bill will increase in 2023.