Your 2023 Social Security Benefits Find out how your benefits have changed
Average Retirement Benefits Starting January 2023
All workers in 2022: $1,681/mo
All workers in 2023: $1,827/mo (+$146)
The 2023 maximum Social Security retirement benefits for a worker retiring at full retirement age: $3,627/mo
An 8.7% cost of living increase for Social Security retirement benefits and SSI payments begins with December 2022 benefits (payable in January 2023).
Increase your Social Security retirement benefits by 5 to 8% per year when you delay applying until you’re age 70.
Social Security Revenues & Expenditures
Revenue Sources = $1.09 trillion
3.5% – Taxation of benefits
6.4% – Interest
90.1% – Payroll taxes
Expenditures = $1.14 trillion
0.6% – Administrative expenses
0.4% – Railroad Retirement financial interchange
99.0% – Benefit payments
SOURCE: 2022 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, Table Il.B1.
2023 Social Security & Medicare Tax Rates
If you work for someone else…
Your employer pays 7.65%
You pay 7.65%
If you’re self-employed…
You pay 15.3%
NOTE: The above tax rates are a combination of 6.2% for Social Security and 1.45% for Medicare. There is also a 0.9% Medicare wages surtax for those with wages above $200,000 single ($250,000 joint filers) that is not reflected in these figures.
Item
2023
2022
Change
Maximum amount you may pay in Social Security taxes
$9,932.40
$9,114.00
+ $818.40
Maximum earnings amount Social Security will tax at 6.2%
$160,200.00
$147,000.00
+ $13,200.00
165+ million people work and pay Social Security taxes
Social Security has provided financial protection for Americans since 1935
Social Security Payments Explained
Social Security (SS) retirement benefits are for people who have paid into the Social Security system through taxable income.
Social Security Disability (SSD or SSDI) benefits are for people who have disabilities but have paid into the Social Security the system through taxable income.
Supplemental Security Income (SSI) benefits are for adults and children who have disabilities, plus limited income and resources.
Maximum SSI Payments
Filing Status
2023
2022
Change
Individual
$914/mo
$841/mo
+ $73
Couple
$1,371/mo
$1,261/mo
+ $110
How does Social Security work?
When you work, you pay taxes into Social Security.
The Social Security Administration uses your tax money to pay benefits to people right now.
Any unused money goes into Social Security trust funds and is borrowed by the government to pay for other programs.
Later on when you retire, you receive benefits.
Here’s how you qualify for retirement benefits
When you work and pay Social Security taxes, you earn credits toward benefits. The number of credits you need to earn retirement benefits depends on when you were born.
If you were born in 1929 or later, you need 40 credits (10 years of work) to receive retirement benefits
You receive one credit for each $1,640 of earnings in 2023
4 credits maximum per year
Did you know you can check your benefits status before you retire?
You can check online by creating a my Social Security account on the SSA website. If you don’t have an account, you’ll be mailed a paper Social Security statement 3 months before your 61st birthday.
It shows your year-by-year earnings, and estimates of retirement, survivors and disability benefits you and your family may be able to receive now and in the future.
If it doesn’t show earnings from a state or local government employer, contact them. The work may not be covered within Social Security.
A brand new Free Application for Federal Student Aid (FAFSA) made its debut on October 1st, featuring 60% fewer questions and a host of other changes that aim to increase the likelihood that you can qualify for financial aid.
As you prepare to complete this year’s application, here are some tips to maximize your FAFSA eligibility for financial aid.
File the FAFSA early. More than a dozen states award financial aid on a first-come, first-serve basis. Students who file the FAFSA in October tend to get more than twice as much grant aid on average as students who file the FAFSA later. Even better, by completing the FAFSA early you can time your financial requests to colleges with their varied due dates.
Minimize income in the base year. 2021 is the base tax year when filling out the FAFSA for the 2023-2024 school year. If you’ve already filed your 2021 tax return, consider filing an amended Form 1040 if there were deductions you may have overlooked that could reduce your income. Otherwise, file this knowledge away to best position your income for future years.
Reduce the amount of reportable assets. While assets aren’t weighted as heavily as income on the FAFSA, they could still affect overall financial aid eligibility. To decrease the amount of reportable assets, consider using cash in your bank accounts to pay down unsecured debt such as credit cards and auto loans, or maximizing retirement plan contributions. Keep in mind that certain assets aren’t considered when determining financial aid eligibility. This includes the home you live in, the value of life insurance, and most retirement plans.
Use 529 plans wisely. 529 plan owners will impact how the funds are reported on the FAFSA. If the account owner is a grandparent or relative, the funds are not counted on the FAFSA until the money is used. So timing the use of these funds is important. And remember if the account owner is a parent or the student, the balance of 529 plans is considered an asset of the parent on the FAFSA.
Spend a student’s money first. If a student does have cash saved or other assets, consider withdrawing money from student assets first before touching parent assets, since student assets are assessed at a higher rate than parent assets.
Plan for the American Opportunity Tax Credit (AOTC). If your family is eligible for the AOTC, try spending up to $4,000 in tuition and textbook expenses using cash. The AOTC’s maximum tax credit of $4,000 will be worth more dollar-for-dollar rather than using a $4,000 tax-free distribution from a 529 plan.
Our tax code contains plenty of opportunities to cut your taxes. There are also plenty of places in the tax code that could create a surprising tax bill. Here are some of the more common traps.
Home office tax surprise. If you deduct home office expenses on your tax return, you could end up with a tax bill when you sell your home in the future. When you sell a home you’ve been living in for at least 2 of the past 5 years, you may qualify to exclude from your taxable income up to $250,000 of profit from the sale of your home if you’re single or $500,000 if you’re married. But if you have a home office, you may be required to pay taxes on a proportionate share of the gain.
For example, let’s say you have a 100-square-foot home office located in a garage, cottage or guest house that’s on your property. Your main house is 2,000 square feet, making the size of your office 5% of your house’s overall area. When you sell your home, you may have to pay taxes on 5% of the gain. (TIP: If you move your office out of the detached structure and into your home the year you sell your home, you may not have to pay taxes on the gain associated with the home office.)
Even worse, if you claim depreciation on your home office, this could add even more to your tax surprise. This depreciation surprise could happen to either a home office located in a separate structure on your property or in a home office located within your primary home. This added tax hit courtesy of depreciation surprises many unwary users of home offices.
Kids getting older tax surprise. Your children are a wonderful tax deduction if they meet certain qualifications. But as they get older, many child-related deductions fall off and create an unexpected tax bill. And it does not happen all at once.
As an example, one of the largest tax deductions your children can provide you is via the child tax credit. If they are under age 17 on December 31st and meet several other qualifications, you could get up to $2,000 for that child on the following year’s tax return. But you’ll lose this deduction the year they turn 17. If their 17th birthday occurs in 2022, you can’t claim them for the child tax credit when you file your 2022 tax return in 2023, resulting in $2,000 more in taxes you’ll need to pay.
Limited losses tax surprise. If you sell stock, cryptocurrency or any other asset at a loss of $5,000, for example, you can match this up with another asset you sell at a $5,000 gain and – presto! You won’t have to pay taxes on that $5,000 gain because the $5,000 loss cancels it out. But what if you don’t have another asset that you sold at a gain? In this example, the most you can deduct on your tax return is $3,000 (the remaining loss can be carried forward to subsequent years).
Herein lies the tax trap. If you have more than $3,000 in losses from selling assets, and you don’t have a corresponding amount of gains from selling assets, you’re limited to the $3,000 loss.
So if you have a big loss from selling an asset in 2022, and no large gains from selling other assets to use as an offset, you can only deduct $3,000 of your loss on your 2022 tax return.
Planning next year’s tax obligation tax surprise. It’s always smart to start your tax planning for next year by looking at your prior year tax return. But you should then take into consideration any changes that have occurred in the current. Solely relying on last year’s tax return to plan next year’s tax obligation could lead to a tax surprise.
Please call to schedule a tax planning session so you can be prepared to navigate around any potential tax surprises you may encounter on your 2022 tax return.
Your cash is parked in a bank account. Do you know if it’s making or losing you money? Here are some ideas to help you make the most of your banked cash:
Understand your bank accounts. Not all bank accounts are created equal. Interest rates, monthly fees, minimum balances, direct deposit requirements, access to ATMs, other fees and customer service all vary from bank to bank and need to be considered. Start by digging into the details of your accounts. There may be some things you’ve been unnecessarily living with like ATM fees or monthly account charges. Once you have a handle on your current bank, conduct research on what other banks have to offer.
Know your interest rates. As a general rule, the more liquid an account, the lower the interest rate. Checking accounts offer the lowest rates, followed by savings accounts, which yield lower rates than Certificates of Deposits. Maximizing your earnings is as simple as keeping your cash in accounts with higher interest rates. The overall interest rate earned between all your accounts should usually be higher than the inflation rate, which is generally around 2 percent during normal times. But in the midst of high inflation like we are currently experiencing, your combined interest rate may have a difficult time beating the inflation rate.
Make smart moves. There are a couple of things to take into account when making transfers. First, federal law allows for only six transfers from savings and money market accounts per month. If you exceed this number, you’ll be hit with a penalty for each transaction that exceeds six transfers. Second, if you invest in longer-term investments like CDs or bonds, there are penalties for withdrawing funds before the maturity date. So make sure you can live without the funds for the duration of the term.
Stay diligent. Putting together a cash plan is just the start. The key to success is to be persistent. Besides losing out on potential earnings, mismanaging your cash can result in hefty overdraft fees. The more attention you devote to your cash, the more your money will grow.
As a busy working parent, you may be on the lookout for activities that are available for your kids this summer. There may be a solution that’s also a tax break: Summer camp!
Using the Child and Dependent Care Credit, you can be reimbursed for part of the cost of enrolling your child in a day camp this summer.
Am I eligible?
You, and your spouse if you are married, must both be working.
Your child must be under age 13, your legal dependent, and live in your residence for more than half the year.
Tip: If your spouse doesn’t work but is either a full-time student, or is disabled and incapable of self-care, you can still qualify for the credit.
How much can I save?
For 2022, you can claim a maximum credit of $1,050 on up to $3,000 in expenses for one child, or $2,100 on up to $6,000 in expenses for two or more children.
What kind of camps?
The only rule is: no overnight camps.
The credit is designed to help working people care for their kids during the work day, so summer camps where kids stay overnight aren’t eligible for this credit.
Other than that, it doesn’t matter what kind of camp: soccer camp, chess camp, summer school or even day care. All of these are eligible expenses for this credit.
Other ways to use this credit
While summer day camp costs are a common way to use this credit, any cost to provide care for your children while you are working may be eligible.
For example, you can use this credit to pay a qualified day care center, a housekeeper or a babysitter to take care of your child while you are working. You can even pay a relative to care for your child and claim the credit for that expense, as long as the relative isn’t your dependent, minor child or spouse.
This is just one of many possible tax breaks related to children and dependents. Please call if you have questions about this credit, or if you’d like to discuss any other tax savings ideas.
Couples consistently report finances as the leading cause of stress in their relationship. Here are a few tips to avoid conflict with your long-term partner or spouse.
Be transparent. Be honest with each other about your financial status. As you enter a committed relationship, each partner should learn about the status of the other person’s debts, income and assets. Any surprises down the road may feel like dishonesty and lead to conflict.
Frequently discuss future plans. The closer you are with your partner, the more you’ll want to know about the other person’s future plans. Kids, planned career changes, travel, hobbies, retirement expectations — all of these will depend upon money and shared resources. So discuss these plans and create the financial roadmap to go with them. Remember that even people in a long-term marriage may be caught unaware if they fail to keep up communication and find out their spouse’s priorities have changed over time.
Know your comfort levels. As you discuss your future plans, bring up hypotheticals: How much debt is too much? What level of spending versus savings is acceptable? How much would you spend on a car, home or vacation? You may be surprised to learn that your assumptions about these things fall outside your partner’s comfort zone.
Divide responsibilities, combine forces. Try to divide financial tasks such as paying certain bills, updating a budget, contributing to savings and making appointments with tax and financial advisors. Then periodically trade responsibilities over time. Even if one person tends to be better at numbers, it’s best to have both members participating. By having a hand in budgeting, planning and spending decisions, you will be constantly reminded how what you are doing financially contributes to the strength of your relationship.
Learn to love compromising. No two people have the same priorities or personalities, so differences of opinion are going to happen. One person is going to want to spend, while the other wants to save. Vacation may be on your spouse’s mind, while you want to put money aside for a new car. By acknowledging that these differences of opinion will happen, you’ll be less frustrated when they do. Treat any problems as opportunities to negotiate and compromise.
