Inflation has become a real problem ever since we had to deal with the pandemic, so the fact that Social Security Administration has decided to boost the benefits is a good thing. The boost will be accordingly to the cost of living adjustment, or COLA, for the following benefit checks this year.

It’s just one of the many recently announced by Social Security. Over 70 million people are entirely dependent on at least one Social Security benefits program, so all those annual changes made to the program and its payouts were somewhat anticipated.

However, substantially more extensive benefit checks have been considered a rarity in the last few years. As inflation is soaring, all that extra money might help seniors and others pay for everything they need. Here’s what you need to know:

The cost of living adjustment (COLA) rises

The SSA recently announced that benefit checks will increase by 8.7 percent in the coming year, which is a substantial increase from the usual 5.9 percent adjustment in 2023, which was high anyway. As a matter of fact, the recent COLA was the biggest increase since 1981, when it was only 11.2 percent.

The 8.7 percent adjustment will add to a $146 increase in all monthly benefits for the regular retired worker on Social Security, starting with January. To be more precise, the average check for all retired workers will automatically increase from $1,681 to $1,827.

For a married couple where both partners receive the benefits, the estimated payment will automatically increase from $2,734 to $2,972, which is no less than $238 more.

Since 1975, the Social Security Administration managed to tie the cost of living adjustments to the Consumer Price Index for urban wage earners, but also for clerical workers. The SSA has a method: it compares the third-quarter CPI-W in the last year to the third-quarter CPI-W in the current one.

That’s how COLA is measured. Then, it adjusts the COLA depending on the difference in CPI-W from one year to the following one.

Maximum taxable earnings are going up

This year, the maximum earnings subject to Social Security taxes was no less than $147,000. Workers who are paid into the system are taxed on wages on that amount, usually with a 6.2 percent rate.

Next year, the maximum earnings will automatically increase to $160,200, which means that more of a worker’s income will automatically be subject to the tax. The adjustment is due to an increase in the regular wages in America.

Maximum Social Security benefit is also set to increase

As it was expected, the total Social Security benefit for a worker retiring at full retirement age will automatically increase next year, from $3,345 to $3,627. It’s highly important to note that the total amount will work for those who are retiring at the full retirement age, which is around 67 for anyone who was born after 1960.

The total amount will be a bit different for those who retire before their retirement age, as the benefits will be reduced in that situation. The same goes for those who retire after the full retirement age, which is a strategy that might max out your benefit check.

The average help for spouses and disabled workers is getting bigger

The average benefit might increase across the board in the following year, which includes benefits for three categories of people: widows, widowers, and the disabled. Here’s how the figures will work:

The Social Security Administration declared that the average widowed mother with two children will get a sizable bump, from $3,238 to $3,520.
Also, aged widows and widowers who are currently living alone will notice their benefits increase from $1,567 to $1,704.
The benefit will increase for a disabled worker, a spouse, and one or more kids from $2,407 to $2,616

Naturally, these averages and their individual circumstances might vary.

Social Security adjusts earnings test exempt amounts

If you decide to claim your retirement benefits before hitting full retirement age, Social Security will definitely withhold some of the benefits from your own check. The program calls it the “retirement earnings test exempt amounts”, and you should prepare to see a big chunk of your benefits if you are still working.

This is how it will work next year: if you decide to collect Social Security BEFORE reaching full retirement age, then you might earn as much as $1,770 per month, which is $21,240 per year, way before the Social Security Administration starts withholding benefits.

It might happen at the rate of $1 in benefits for every $2 that will be above the limit. This year, the maximum exempt earnings were no less than $1,630 a month, which is $19,560 per year.

But when you reach your full retirement age, the rule will still apply, only until you hit full retirement age. Besides, there will be much more forgiving terms. Next year, you might earn up to $4,710 per month, which is $56,520 per year, before benefits are withheld.

Also, it will be at the rate of $1 in benefits for every $3 that was earned above the limit, instead of just $2. This year, the threshold was $4,330 a month, which is $51,960 per year.

A couple of Medicare premiums will be lower

As Social Security and Medicare are completely different, the majority of retirees will prefer participating in both, so the nationalized healthcare system decided to make a particularly notable change for next year.

Monthly Medicare Part B premiums will definitely increase from $170.10 in 2022 to only $164.90 soon. It has been noted by the Centers for Medicare and Medicaid Services (CMS) that the complete Medicare enrollment was almost 64 million in October 2021.

What’s the maximum amount of Social Security benefit you can get on a monthly basis?

The most you can get from Social Security depends completely on a couple of factors. First, how much you have earned over your working life when you start taking your benefits, and your COLA increase. In time, these benefits will increase, as long as the COLA shows an increase. The maximum initial monthly benefit for the next year’s retirement age is the following one:

Age 62: $2,572
Age 65: $3,279
Age 66: $3,506
Age 70: $4,555

The figures are made in such a way for those workers who presumably had steady earnings at their maximum taxable level since 22 years old. For the next year, the maximum taxable income is $160,200, which is a number that’s usually bigger by the year.

Your benefit solely depends on how much you earned, up to some maximum every year. Taking your benefit later in life might help increase it. Workers might claim a benefit way earlier, at 62 years old, for example, if they have contributed a minimum of 10 years of work, before reaching what’s known as full retirement age, which could range from 65 to 67, depending on the state they were born.

If you decide to claim your benefits earlier, your check will be way less than it could have been. But if you wait until 70 years old to claim your benefits, you will get more every month. As a matter of fact, the appropriate age to claim Social Security is one of the most debated topics.

If you want to get these benefits, you have to pay Social Security taxes of 6.2 percent of your income, up to the maximum taxable income. Your employees also pay another 6.2 percent of the salary you receive into that fund, but if you are self-employed, then you need to foot that portion of any tax bill, too.

If you found this article useful, you might also want to try: 10 Types Of Retirement Income Tax You Need To Know About