With inflation picking up, Social Security benefits will jump a whopping 8.7% in 2023.
Benefit recipients will see the raise beginning with the checks to be issued the first week of January 2023. To make matters even better, the Medicare Part B premium that is automatically deducted from your Social Security check will actually decrease from $170.10 to $164.90 for the vast majority of beneficiaries. This is the first time in many years that we haven’t had to rely on the “hold harmless” provision that prohibits Medicare Part B premiums from increasing in excess of the increase in Social Security benefits. Keep in mind, however, that seniors with higher incomes will pay an increased Medicare Part B premium. Seniors with “modified adjusted gross income” of at least $97,000 ($194,000 for couples) a year are subject to the Medicare premium surcharge.
With this 2023 Social Security cost-of-living adjustment, the maximum retirement benefit for a worker retiring at full retirement age in 2023 increases slightly to a lofty $3,627 per month. Remember, however, that full retirement age is now age 66 and 6 months for those born in 1957. Full retirement age will gradually increase so that it will eventually become age 67 for those born in 1960 or later. The earliest a person can start receiving Social Security retirement benefits will remain at age 62. The average monthly benefit for all retired workers in 2023 will rise to $1,827.
THE 2023 EARNINGS LIMITS
SENIOR CITIZENS’ FREEDOM TO WORK ACT OF 2000
When this article was first posted in 2000, there were limits on the amounts retirees between ages 65 and 69 could earn without sacrificing any benefits. Thanks to the Senior Citizens’ Freedom to Work Act of 2000, those who have reached full retirement age (full retirement age is now age 66 and 6 months for those born in 1957) can continue to work and have unlimited earnings without causing a reduction in their Social Security benefits. This change became effective as of January 1, 2000. Prior to this change, those between the ages of 65 and 69 saw a reduction in their benefits if they had excess earnings.
Unfortunately, there is still an earnings limit for those who elect to start receiving Social Security benefits before reaching full retirement age. Social Security retirement benefits are reduced at the rate of $1 for every $2 over the limit. For the year 2023, the earnings limit is now $21,240. In addition, if your spouse is receiving benefits based on your earnings, their benefits are also reduced due to your excess earnings. However, in the year you reach full retirement age, $1 in benefits will be deducted for each $3 you earn above a different limit, but only counting earnings before the month you reach full retirement age. For 2023, this other limit is $56,520. Once you hit full retirement age, it’s truly the golden years as you can earn as much as you want thereafter without having your Social Security benefits reduced. For more on these rules check the Social Security website.
Those under full retirement age should keep in mind that it’s only earnings from self-employment and wage income that are considered in determining whether your earnings exceed the limits. That is, interest, dividend and other so-called passive income is not counted. Neither are capital gains or most forms of rental income. The bottom line is that investment income won’t cause you to lose your Social Security benefits.
Those receiving Social Security who are still in the workforce should be aware that their current earnings may actually entitle them to a larger Social Security benefit. This would be the case if their current earnings are greater than their earnings in earlier, pre-retirement years. If your post-retirement earnings have increased significantly, you should ask the local Social Security office to recalculate your benefits.
Finally, those still in their working years should periodically make sure the Social Security Administration has an accurate record of their earnings. They used to send an annual statement, but because of budget constraints, they now only send the statements to those age 60 and older who aren’t receiving benefits and don’t have a “my Social Security” account. As such, if you want to keep closer tabs on your record, create an online account at the Social Security website. After you register, you’ll be able to get a full report of your earnings record and projected benefits. If you don’t want to create an online account, you can still receive an earnings statement by mail by completing a “Request For Social Security Statement” (Form SSA-7004).