5 Things To Know About Social Security Increases
What the Upcoming Social Security Increase means for those who Collect.
Starting in January, 2023, recipients of Social Security can expect to see an 8.7% increase in benefits. This is one of the largest increases since 1982. This increase comes as part of the cost-of-living increase and is meant to help with the increase in everyday costs. Recipients will receive notices of this increase through December. Below is a brief overview of some of the impacts of the increase.
- Who is eligible? Recipients who are at least 62 years of age, disabled individuals, and family members of eligible individuals may also collect Social Security.
- How large are the increases? The below increases are what recipients can expect in January 2023:
- $146 for individual retired workers
- $238 for retired couples
- $282 for those with children receiving survivors’ benefits
- $137 for those without children receiving survivors’ benefits
- $119 for disabled workers
- While this increase is good news, it comes with an increase in taxation. The result is that most people who get most of their income from Social Security will not see any significant difference financially. Those who will see the most benefit from this increase will be those who have other sources of income. Here is a breakdown of how benefits will be taxed:
- Individual tax filers earning up to $25,000, or couples earning up to $32,000 will not pay taxes on their Social Security benefits.
- Individual tax filers earning between $25,000 and $34,000 a year, and couples earning between $32,000 and $44,000, will pay taxes on up to 50% of their benefits.
- Single and joint tax filers making above those thresholds will pay taxes on up to 85% of their benefits
- A tip to remember: 15% of social security benefits will always be tax-free, regardless of tax filing status or annual income.
- Better news is that Medicare Part B premiums will be decreased by $5.20 a month. This is the first time in over a decade that premiums are not increasing, and actually going down. This should provide some relief to recipients.
- What are the long-term effects of this increase? Current recipients and future recipients should prepare for the possibility of money running out. The trust fund that pays Social Security benefits is expected to run out by 2035. With this new cost-of-living increase it is anticipated that it can be depleted before then. If the economy falls into a recession, that can speed up this timetable, as the majority of funding comes from payroll taxes. Considering alternative means of income or ways to invest may be possible solutions to this potential issue.
This is not intended to be legal advise. You should contact your attorney to discuss your specific situation.
Krystle Butcher, Esq. is an Associate at the firm and practices litigation.
She can be reached at 845-764-9656 and by email.[/column]