WHAT'S HAPPENING

SOCIAL SECURITY AND DISABILITY BENEFICIARIES BEGIN RECEIVING 8.7% COST OF LIVING INCREASE

The Social Security Administration (SSA) has announced an 8.7% increase in Social Security and Supplemental Security Income (SSI) benefits for 2023, the largest cost-of-living increase (COLA) in years, due to recent inflation.

Increased payments to Social Security recipients begin in January 2023, while increased payments to SSI recipients will be included in their checks or deposits on December 30, 2022. Other numbers regarding eligibility for disability and average benefits have also changed for 2023.

WHAT ARE THE SOCIAL SECURITY BENEFIT AMOUNTS IN 2023?

While the exact Social Security retirement and disability benefit amount that a person can receive depends on their lifetime earnings, here are the average benefit amounts that Social Security anticipates for 2023:

The maximum Social Security retirement benefit that can be collected at full retirement age is $3,627 per month in 2023, though few people (very high-earners) are able to collect this amount.

HOW ARE YOUR SSDI PAYMENTS CALCULATED?

SSDI payments depend on your average earnings over the past 35 years (actually, Social Security will use the 35 years in which you had the highest income). Social Security will average your earnings over these 35 years to come up with your "average indexed monthly earnings" (AIME). The agency then takes certain percentages of your AIME (called bend points) to come up with your primary insurance amount. In 2023, the bend points are:

For details on the calculations, see our article on how much you'll get in SSDI.

HOW MUCH IS SSI IN 2023?

The new SSI federal base amount is $914 per month for an individual and $1,371 per month for a couple (up from $841 and $1,261 in 2022). The SSI payment amounts are higher in states that pay a supplementary SSI payment. Most SSI recipients, however, receive less than the federal base amount because of income or free room and board.

DOES WORKING AFFECT ELIGIBILITY FOR DISABILITY?

An applicant for disability benefits through the Social Security disability insurance (SSDI) or SSI programs must be making less than $1,470 per month (up from $1,350 per month in 2022) to qualify for benefits. (Blind applicants can make up to $2,460 per month). Anyone working above those limits is considered to be doing "substantial gainful activity" (SGA).

SSDI LIMITS ON WORKING

People who are currently receiving SSDI and who attempt to return to work can make more than that during a trial work program. SSDI recipients can get up to nine months of trial work. A month counts as a trial work period month when an SSDI recipient makes more than $1,050 per month (up from $970 per month in 2022).

COLA AND A SMILE: Social Security anticipates an average disability benefit of $1,483, an increase of $119.

SSI LIMITS ON WORKING

For people who are receiving SSI, the new federal income limit for SSI is $914 per month, but complicated rules govern what income is countable and what income is not. Over half of the income made by an SSI recipient isn't counted toward the limit, so you can actually receive SSI until you make up to $1,912 per month in 2023 (if you have no other income).

But any income you receive between $0 and $1,912 will reduce your monthly benefit. (For instance, if you earn $1,225 a month and have no other income, your SSI check will be only $344.) To learn how the SSA calculates the reduced benefit, see our article on countable income for SSI. In some states that make extra payments to SSI recipients, the income limit for SSI recipients may be higher.

The income exclusion amount for students receiving SSI is now $2,220 per month (up to an annual limit of $8,950).

DOES WORKING DURING EARLY RETIREMENT AFFECT BENEFITS?

If you collect early retirement benefits but continue to work, Social Security will reduce your benefits if you make over $21,240 per year ($1,770 per month) in 2023. But during the year you reach full retirement age, you can make up to $4,710 per month without having retirement benefits taken away. (After you reach full retirement age on your birthday, your benefits aren't reduced at all, regardless of the amount of work or earnings.) Any early retirement benefits that Social Security deducted while you were working are added back to your retirement check over the next 10 to 15 years.

HOW MUCH IN TAXES DOES SOCIAL SECURITY WITHHOLD?

The maximum amount of earnings that is subject to the Social Security tax is $160,200 in 2023, up from $147,000 in 2022. There is no limit to the amount of income subject to the Medicare tax.