As millions of Americans undoubtedly marked Jan. 1 with resolutions – here’s what’s in store for the year to come — whether you’re decades away or decades into retirement.
Question: If a beneficiary recently retired at the age of 63 and claimed Social Security, will the beneficiary’s Social Security check reduce if he/she works part-time to earn some extra money?
Answer: Social Security will apply the “earning tests” to the beneficiary’s income and a portion of the earnings will be withheld if the earnings exceed a certain threshold. This will happen if the beneficiary applied for Social Security before reaching the full retirement age of 66 to 67 for most workers.
In 2023, a beneficiary can earn up to $21,240 before Social Security will deduct $1 in benefits for every $2 earned over that amount. If the beneficiary reaches full retirement age in 2023, up to $56,520 is earned before Social Security withholds $1 in benefits for every $3 earned over the limit. Once the beneficiary reaches the month of full retirement age, the earning test is not applicable anymore and the monthly benefit amount is adjusted upward to cover up the forfeited benefits.
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Question: Workers will pay more in Social Security taxes in 2023. Is it true?
Answer: Yes, workers will pay more Social Security taxes in 2023 if they belong to those earning a higher income. In Social Security payroll taxes, 6.2 percent is paid by the employees while the other 6.2 percent is paid by employers making it 12.4 percent. Once your income exceeds a certain threshold, the withholding for payroll taxes ends.
In 2023, if you earn at least $160,200 you will pay $818 more in your Social Security taxes. This means that workers will pay Social Security taxes with a 9% increase from the $147,000 tax amount in 2022.
Question: Will the big COLA for Social Security beneficiaries make the program’s solvency problems worse?
Answer: The Social Security’s board of trustees projected that the trust fund of the program will be used up by 2035 unless lawmakers act to avoid the fund’s depletion. Concerns about financial stability were raised due to the 8.7 percent increase in the COLA which results in higher payouts in 2023.
Maya MacGuineas, president of the organization said that the problem is not the COLA, but the several promised benefits. If the trust fund is used up before the projected date, Social Security won’t disappear but this will cause a shortage and only 77 percent of the promised benefits will be given. But given the popularity of Social Security, Congress will surely intervene before depletion happens since a quarter of recipients rely on benefits.
