It’s no surprise that due to the increased level of inflation that this country is experiencing, the Social Security COLA, or cost-of-living adjustment, is staggering. Other 2023 Social Security changes beyond the COLA are on tap, too.
For 2023, those collecting Social Security will see a COLA increase of 8.7%. This means that if you are collecting $2,000 a month in 2022, next year you’ll see that number go up to $2,174 per month.
In addition, there will also be an adjustment for tax purposes next year when it comes to paying into Social Security. In 2022, the threshold to pay into Social Security is $147,000. This number is also referred to as the taxable minimum – but it really means that it’s the amount of your income that is subjected to Social Security taxation. Anything you make above that amount is not subjected to further taxation for Social Security.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In 2023, that threshold is increasing to $160,200. So next year, the first $160,200 of your income will be taxed for Social Security at a rate of 7.65%.
It’s also important to note that if you have not reached your full retirement age (FRA), and you’re still working, you will have $1 in benefits withheld for every $2 in earnings you make above the earnings limit. In 2022, that amount is $19,560, and in 2023, it will increase to $21,240 in earnings.
To complicate things further, the year an individual reaches their FRA, the income limit goes from $51,960 per year to $56,520 per year. This applies only to earnings for the months prior to attaining your FRA. $1 in benefits will be withheld for every $3 in earnings above this limit. The good news is the month after you reach your FRA, there is no reduction whatsoever.
Do These Changes Change Your Plans?
As financial planners, we often advocate for not taking your Social Security benefits while you’re still earning income, as you receive less than you’re eligible to collect, but if you wait, your benefits will keep increasing for the years that you aren’t earning later.
While you can begin collecting Social Security at age 62 on a reduced benefit, you can wait as late as age 70 on a full benefit. If you’re older than 70, there’s no additional benefit to waiting, as you’ve already achieved the most benefit possible.
When you’re determining when to take your own Social Security, there are many factors to consider, beyond your age and when you stop working. Take into account your investments and at what rate they’ll be taxed, in addition to what other fixed incomes you may have during retirement.
You’ll also want to account for your general health and life expectancy. Your spouse, their age and their own Social Security will play into this equation as well.
Disclosure: Diversified, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC. A copy of Diversified’s current written disclosure brochure which discusses, among other things, the firm’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. Investments in securities involve risk, including the possible loss of principal. The information on this website is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.
-
September Fed Meeting: Live Updates and CommentaryThe September Fed meeting is a key economic event, with Wall Street keyed into what Fed Chair Powell & Co. will do about interest rates.
-
Ask the Editor: Questions on 529 Plan Rollovers to a Roth IRAAsk the Editor In this week's Ask the Editor Q&A, we answer four questions from readers on transferring 529 plan money to a Roth IRA.
-
I'm an Investment Strategist: This Is How the Fed's Next Rate Move Could Impact Your WalletInterest rate cuts might be coming, which could affect everything from your credit card debt to your mortgage. It's smart to prepare now — here's how.
-
I'm a Retirement Planner: These Are Three Common Tax Mistakes You Could Be Making With Your InvestmentsDon't pay more tax on your investments than you need to. You can keep more money in your pocket (or for retirement) by avoiding these three common mistakes.
-
Want to Shave 10 Hours Off Your Workweek? A Startup Expert Shows How AI Can HelpArtificial intelligence is overhauling how companies operate, freeing up entrepreneurs and their workers to skip the menial stuff and get down to business.
-
Four Clever and Tax-Efficient Ways to Ditch Concentrated Stock Holdings, From a Financial PlannerHolding too much of one company's stock can put your financial future at risk. Here are four ways you can strategically unwind such positions without triggering a massive tax bill.
-
Beyond Banking: How Credit Unions Serve Their CommunitiesCredit unions differentiate themselves from traditional banks by operating as member-owned financial cooperatives focused on community support and service rather than shareholder profit.
-
Answers to Every Early Retiree's Questions This Year, From a Wealth AdviserFrom how to retire in a crazy market to how much to withdraw and how to spend without feeling guilty, a financial pro shares the advice he's given this year.
-
The Risks of Forced DST-to-UPREIT Conversions, From a Real Estate ExpertSome new Delaware statutory trust offerings are forcing investors into 721 UPREIT conversions at the end of the hold period, raising concerns about loss of control, limited liquidity, opaque valuations and unexpected tax liabilities.
-
I'm a Financial Adviser: You've Built Your Wealth, Now Make Sure Your Family Keeps ItThe Great Wealth Transfer is well underway, yet too many families aren't ready. Here's how to bridge the generation gap that could threaten your legacy.
