Social Security 2023: 6 Things Boomers Can Expect
Baby boomers have been working their whole lives to build up the Social Security benefits they’re currently receiving or will start receiving soon. And this year, there’s a lot for them to know.
2023 is shaping up to be one of the most consequential years in the program’s history, and those born between the end of World War II and the mid-1960s have more skin in the game than any other age group. Here’s a look at what they can expect.
Boomers Are Better Classified Into Two Distinct Groups
Some people split baby boomers into two smaller groups, partly because the generation spans so many years, but also because their young life experiences were so radically different.
Early boomers, or leading-edge boomers, were born between 1946-1954 and are currently 69-77. Late boomers — sometimes called trailing-edge boomers or Generation Jones — were born between 1955-1964 and are currently 59-68.
Unlike the older set, most of their parents were not World War II veterans and they grew up with no military draft after the Civil Rights, Women’s Rights and other major political movements had already transpired.
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They’ll Be Eligible for Full Benefits at Different Ages
All early boomers have already reached their full retirement age, which is when you become eligible to collect 100% of your benefits. You can claim your benefits as young as 62, but the Social Security Administration (SSA) reduces your payment by 5/9 of 1% for every month you claim before your full retirement age.
For those born between 1943-1954 — all early boomers — the age is 66. For late boomers, the full retirement age varies by year of birth:
- 1955: 66 and two months
- 1956: 66 and four months
- 1957: 66 and six months
- 1958: 66 and eight months
- 1959: 66 and 10 months
- 1960 and later: 67
Some Boomers Can Still Collect Credits — Others Can’t
The SSA reduces benefits for early retirement, but it also increases benefits for those who wait. The SSA awards delayed retirement credits, which boost your payment by 2/3 of 1% for every month you put off collecting past your full retirement age.
That’s 8% per year for people born in 1943 or later, which includes all boomers — but credits stop accumulating when you turn 70. That means most early boomers can no longer collect delayed retirement credits, but all late boomers still can.
2024 Probably Won’t Bring a Repeat of This Year’s Massive COLA
Since 1975, the SSA has made annual cost of living adjustments (COLAs) to ensure benefits keep up with inflation, as recorded in the Consumer Price Index (CPI).
In the wake of 2022’s bruising inflation, the SSA announced an 8.7% COLA for 2023, which was substantial even compared to the unusually high 5.9% adjustment from the previous year. This year’s COLA was the highest since the 11.2% adjustment in 1981.
The extra 8.7% boosts the average retiree’s monthly check by $146 from $1,681 to $1,827.
Despite today’s stubbornly high inflation, there’s widespread agreement that next year’s COLA will be much more modest. The Senior Citizens League expects recipients to get a raise of 3% or less in 2024. Other industry organizations predict a COLA of less than 2% next year.
Maximum Taxable Earnings and Benefits Cap Rose, Too
Many boomers are still paying into the system through their payroll taxes. In 2022, their income was subject to Social Security taxes up to only $147,000. This year, the maximum taxable earnings jumped to $160,200. The Social Security tax is 6.2% or 12.4% for the self-employed.
Although younger boomers will see more of their earnings taxed to fund Social Security, those already receiving payments can collect more. The maximum full retirement age benefit increased from $3,345 per month in 2022 to $3,627 in 2023.
If You’re Still Working, You Can Earn More Without Penalty
Under the so-called retirement earnings test, retirees can continue working for income up to a certain amount without seeing a reduction in their Social Security benefits.
In 2023, those under full retirement age can earn $21,240 a year ($1,770 per month), up from $19,560 per year ($1,630 per month) in 2022. The SSA temporarily withholds $1 for every $2 earned above the threshold.
If you’re set to reach full retirement age in 2023 but you’re not there yet, you can earn $56,520 per year or $4,710 per month. After that, the SSA withholds $1 for every $3 earned above the limit. In 2022 it was $51,960 per year or $4,330 per month.
You can earn unlimited income and still collect benefits without penalty once you reach full retirement age.
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