What Changes Are Coming to Social Security in 2023?

The COLA for 2023 will raise your Social Security benefits by 8.7% in 2023. This is historically high compared to previous years. From 2010 to 2020, the COLA didn’t rise above 3.6%.

How the COLA affects your benefit varies, depending on the type of Social Security benefit you’re receiving and your own work history. The three main types of Social Security benefits are retirement, disability and survivors. Retirement benefits typically have the highest benefit amount, so they receive the highest COLA.

Note: these projected increases are based on the average benefit amounts from August 2022 with the addition of the 2023 COLA.

Due to funding gaps for Social Security and extended life expectancy, there is a proposal to raise the full retirement age (FRA) to 68 instead of 67.

If approved, the FRA would increase by two months each year until it reached 68. This is projected to fill 18% of the funding gap, according to AARP.

The idea of raising the FRA isn’t new — it’s already been done before. Originally, the FRA was 65 years old. Depending on when you were born, FRA has reached 66 and gradually rises to 67 for those born in 1960 and later.

Note that this proposal is not official yet and may not even pass.

Benefit amounts will increase for each type of Social Security benefit in 2023. Below is the average benefit amount from August 2022. By adding the COLA, we can get an estimate on the average benefit amount for 2023. Remember that this is an average estimate and there are many complex factors that go into calculating your benefit amount.

For retirement benefits and Supplemental Security Income (SSI), the maximum payable amount for Social Security rose for 2023.

The maximum earnings subject to Social Security taxes rose by $13,200, up to $160,200. This means more of your earnings are going to be subject to taxes if you’re still working in 2023.

This is a high jump compared to previous years. From 2017 to 2022, the annual maximum tax cap increase didn’t exceed $5,100. The jump of $13,200 is over double the usual increase.

If you continue to work while receiving Social Security, your benefit amount could be reduced, depending on how old you are when you start receiving benefits. If you are at your full retirement age or older already, you won’t face any deductions.

If you’re younger than your FRA and start receiving benefits, your earnings limit is $21,240. If you earn over $21,240 in 2023, $1 of the excess benefits will be deducted for each $2. For example, if you earned $31,240, only $10,000 will be deducted.

If you are reaching your FRA in the year that you started collecting benefits, the earnings limit increased to $56,520. $1 will be deducted for each $3 earned over the earnings limit.

Because Medicare premiums can be deducted from your Social Security benefit, a lower premium means more money back in your pocket.

Kilolo Kijakazi, Acting Commissioner of the Social Security Administration, was quoted in a press release in reference to lower Medicare premiums.

Medicare Part B, which is automatically deducted from your monthly benefit, is $164.90 in 2023.

Medicare Advantage, also known as Part C, and Part D can also be deducted from your Social Security benefit. With Part C and D, you’d need to contact your insurer to arrange the deduction. It doesn’t happen automatically like with Part B.

In 2023, the average Part C premium is $17.86 a month. The average Part D premium is $56.49 a month.

Part A doesn’t typically charge Medicare beneficiaries a premium, so it doesn’t influence your Social Security benefit.

To help you get a better idea of how much you’ll retain in your Social Security benefit, refer to the table below comparing premium amounts from 2022 and 2023. Remember that the premium amounts for Part C and D are the average estimates. Prices vary widely by state and insurer. With Part B, everyone has the same premium amount.