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2023 Social Security Changes


The Social Security Administration (SSA) makes changes to Social Security programs every October that go into effect the following January. The biggest changes tend to concern Cost of Living Adjustments (COLA), which ensure that retirement, disability and survivors benefits keep pace with increases in the cost of living. Calculating your benefits amidst these regular changes can sometimes be challenging. To give you a better sense of how they’ll affect your situation, we’ve taken a closer look at the changes that will take effect in January 2023.  

A financial advisor can help you create a financial plan to keep up with inflation and pay for your retirement needs and goals.

Increased Payment to Beneficiaries 

Social Security announced a 8.7% hike in its COLA for 2023, an increase that will begin to be paid in January 2023. That’s substantially more than the average annual increase over the last 10 years, which was 5.9% in 2022 and 1.3% in 2021.

The COLA increase is calculated by the Bureau of Labor Statistics (BLS), based on consumer price data, in order to neutralize the effects of inflation.

The 8.7% increase for 2023 means different things depending on what type of Social Security support the beneficiary was receiving.

Retired WorkersFor the average retiree, the 8.7% increase will come out to about $146, making the average monthly benefit amount $1,827 for 2023. Some retirees have Medicare premiums taken directly from their checks, so they may not see the full amount.
Retired Worker and Aged SpouseFor a senior couple in which both spouses are receiving benefits, the average increase will be $238, making the total benefit amount $2,972.
Widow With Two ChildrenA widow with 2+ children will receive an average benefit of $3,520 in 2023, a $238 increase from 2022.
Surviving SpouseA surviving spouse with no children will receive an average benefit of $1,704, a $137 increase.
Disabled WorkersOn average, disabled workers will receive $2,616, a $209 increase from 2022.
Disabled Worker + Spouse + ChildrenA disabled worker with a spouse and one or more children will receive an average benefit of $1,483, an increase of $119.

Increased Maximum Taxable Earnings 

SmartAsset: 2023 Social Security Changes

Social Security is mainly funded by a payroll tax that is paid by workers and employers. Employees have 7.65% of their paycheck withheld to go toward Social Security, and employers match that amount. Those who are self-employed must pay the full 15.30%.

However, the tax only applies to income up to a certain maximum amount. This number, called the Social Security wage base, often rises each year with inflation. The maximum taxable earnings for 2023 will be $160,200, which is up from $147,000 in 2022.

The tax rate will remain the same as 2022 (7.65%).

This means that someone who makes $180,000 per year will only have to pay the 7.65% tax on the first $160,200 of their earnings. So the most that can be withheld from an employee’s paycheck for Social Security in 2023 is $12.207.24. If you’re self-employed, the number is twice that ($24,414.48).

Increased Full Retirement Age

Full retirement age is the age at which Social Security benefits may be collected at their full amount. Full retirement age has been increasing since 1938 as life expectancy has continued to increase. The earliest that Social Security can be collected is at age 62. However, full retirement age falls somewhere between 66 and 67, and if you start claiming earlier than that, your benefits will be permanently reduced.

For anyone who turned 62 in 2020, full retirement age is 66 and eight months. But if you were born in 1957, full retirement age is 66 and six months. For anybody born in 1960 or later, full retirement age will be 67.

Beneficiaries have the option to delay collecting Social Security beyond their full retirement age. Each year that collection is delayed, the benefits increase until you hit age 70. This is the latest that someone can claim retirement benefits and the age at which those benefits max out. The upside of waiting to collect is that the payout each year will be greater, but you will collect for fewer years.

Social Security also gives beneficiaries the option to cancel benefits within 12 months of filing for them. The beneficiary will have to repay any money that has already been claimed by himself, a spouse or children. The beneficiary can then file later to claim his full benefits. If a beneficiary withdraws a claim, he will not be able to withdraw any future claim.

Increased Earnings Limits 

If you file for Social Security benefits while still working, and you haven’t yet reached full retirement age, there is a limit to how much you can earn before some or all of your benefits will be withheld.

If you’re younger than full retirement age during 2023, Social Security will deduct $1 from your benefits for each $2 you earn above $21,240. If you reach full retirement age during 2023, Social Security will deduct $1 from your benefits for each $3 you earn above $56,520 until the month you reach full retirement age.

Social Security Disability Earnings Limit Increase

SmartAsset: 2023 Social Security Changes

The SSA offers disability benefits through Social Security Disability (SSDI) and Supplemental Security Income (SSI) programs. There are a number of disabilities, including physical and mental conditions and illnesses, that make someone eligible for disability benefits. You can usually claim the benefits when something prevents you from working for at least a year. If you are able to start working again, benefits will stop.

However, the SSA takes into account that some people with disabilities may be able to do some work. In these cases, there is a limit to how much you can earn per month before benefits are no longer offered.

As of 2023, those who are legally blind may receive a maximum of $2,460, a $200 per month hike over the 2022 level. For other disabilities, the maximum benefit rose $119 per month to $1,483.

Social Security Credits Require More Earnings 

In order to be eligible to receive Social Security, you must pay Social Security taxes and earn 40 credits; you typically earn one credit per quarter, provided you earn a minimum amount of money in that quarter. In 2023, one credit is equal to $1,640. This is a $130 increase over the 2022 amount, due to inflation and higher earnings.

COLA Notices Posted Online 

Social Security recipients can view their Cost of Living Adjustments through their mySocialSecurity account. These changes are mailed each year, but going forward, recipients will be able to choose how they receive this notice. The benefit of viewing the notice online is that adjustments can be seen more often, as opposed to once a year by mail.

Tips for Navigating Social Security

  • As you plan for retirement, make sure you’re accounting for every potential source of income, including Social Security. Calculating your benefit amount and reviewing strategies around timing and spousal benefits are just some things to start thinking about.
  • A financial advisor can be helpful when building a retirement income plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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