2023 Social Security Changes You Should Know
There are some changes coming to social security in 2023 that will affect both those approaching retirement and those already in retirement and receiving social security. See below our quick breakdown of those changes, what you should know, and what you should do in light of this information.
If you’re already receiving social security, you already know about the Cost of Living Adjustment (COLA). This adjustment will increase the social security benefit you’re currently receiving by 8.7%. For example, if you were receiving the average social security benefit of $1,850 per month, this adjustment will make your new social security payment close to $2,000.
Taxable Income Adjustment
There’s also an adjustment for those who are not retired yet and are still earning an income and paying into social security. The amount of your income that’s subject to social security tax was previously $147,000 per year. Any income above $147,000 than was not subject to social security tax. In 2023 that number is going to change to $160,200 per year. So, going forward, up to $160,200 of your annual income will be subject to social security tax at a rate of 7.65%. There is not anything you can do strategically to avoid this change, but it is something to be aware of. That said, if you’re in your 60s and starting to develop a game plan for social security, you should pay attention to this next change.
Beware of Starting Social Security Early
If you’re under your “full retirement age” by social security standards and you are still earning some level of income from something like consulting or a part-time role, then you need to think twice before choosing to start social security early. Here’s why: if you were making more than $19,560 per year in 2022, you might actually be subjecting to a withholding that is the equivalent of $1 for every $2 you make, which often makes taking social security early a poor decision mathematically. In 2023, that earning limit will actually increase to $21,240.
This consideration can get a little complex but it’s very important to understand, so we recorded a separate video explaining it in more detail and even walking through a real-life example from one of our clients. You can review that video here to see if this consideration would apply to you.
Meeting With an Advisor Consultant
It’s important to note that like many financial-related issues, there are quite a few factors that impact your financial plan, whether it’s Social Security planning, maintaining your lifestyle, or income in retirement. Like many of our clients, you might not be too worried about running out of money in retirement, but there might still be tax planning opportunities to optimize your financial situation even further. related to tax planning.
If you’re not sure how to model out different scenarios related to social security decisions, retirement income planning, or tax planning, see if you can reach out to a Certified Financial Planner™. Our recommendation would be to try to find someone who has been working specifically with retirees or who has at least 10+ years of experience. Many of them have a free consulting session that you could take advantage of to get a better idea of your situation and your options. Obviously, our team at Streamline would also love to serve you. We don’t always have the capacity to serve everyone that contacts our team, but we’d be happy to point you in the right direction no matter what.
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