Social Security recipients are set to receive a sharp increase in 2023, with benefits rising 8.7%, the most in four decades.
The inflation-related bump could convince some retirees to take advantage of their benefits early, before they reach full retirement age. It might also raise some questions.
- How do you apply for social security?
- How are benefits calculated?
- Are they taxable?
The cost of living adjustment, or COLA, will raise the average retiree’s monthly payment by $146 to $1,827 next year, according to the Social Security Administration (SSA). However, for 70 million pensioners, disabled and others, the increase will simply help them meet inflation which hit a 40-year high of 9.1% earlier this year, surpassing 5.9%. COLA they received in 2022, says Mary Johnson, a policy analyst for the Senior Citizen League, an advocacy group.
Here’s what you need to know:
What is Social Security?
Social Security is “the most successful anti-poverty program in our country’s history,” according to the SSA. President Franklin D. Roosevelt signed the Social Security Act into law in 1935 as a retirement program for workers. It was part of the historic New Deal and the first lump sum payments were made in 1937.
Payments for survivors of workers were added by Congress in 1939, and regular monthly benefits began in 1940. Disability benefits were added in 1956.
Today’s workers pay their Social Security taxes into the program, and the money is disbursed as monthly income to beneficiaries in a “pay-as-you-go” system, according to the National Academy of Social Insurance.
What does your ex get?After a divorce, are you entitled to Social Security benefits?
One in five Americans receives benefits, including more than 47 million retired workers and dependents, 10 million disabled workers and dependents, and 6 million survivors of deceased workers.
How to apply for social security
To claim benefits, you must be at least 61 years and 9 months old and want your benefits to start in no more than four months, according to the SSA.
You can apply online or by calling 800-772-1213 (TTY 800-325-0778). As COVID subsides, SSA has scheduled more in-person appointments at local offices.
How much Social Security will I receive?
SSA calculates your benefit based on the monthly average for up to 35 of your highest earning years rather than, for example, the last five years. Earnings are indexed to the change in overall wage levels and the rise in the nation’s standard of living during the working period. Your future benefits will then reflect that increase.
A Social Security calculator can help you figure out your benefits.
When checking whether or not your earnings record is correct, keep in mind that there is no statute of limitations on correcting salary-related errors, according to Kurt Czarnowski, a principal at Czarnowski Consulting.
“A person has to provide proof of what the correct amount of earnings was,” Czarnowski said at a recent National Association of Personal Financial Advisors conference. “But even if it’s something from 1976, if (you) happen to have (your) W-2, (you) can make that fix.”
To delay or not?Should You Stop Taking Your Social Security Retirement Benefits? Here’s what to consider
Also, keep in mind that someone who chooses to receive benefits at the earliest possible age — age 62 — would see their payment reduced by up to 30%. Conversely, workers who delay retirement beyond the full retirement age — 66 or 67 for most people — would see an 8 percent increase in benefits for every year they wait until age 70.
Is Social Security taxable?
It depends on your income. You’ll be taxed on up to 50% of your benefits if your income is $25,000 to $34,000 for an individual, or $32,000 to $44,000 for married couples filing jointly, according to AARP. Up to 85% of your benefits are taxable if your income is more than $34,000 for an individual or $44,000 for a married couple.
How to get a new social security card?
If you lose your Social Security card, in most cases you don’t need to replace it. Just know your number, says SSA.
If you need a replacement, you can apply online with a free My Social Security account or in person. If you can’t use your account to apply for a replacement card, you can still start the process and complete it at a local Social Insurance office — usually more quickly, says SSA. In that case, however, you’ll need to provide the required documents, such as a birth certificate, driver’s license, and passport.
8 things to know: What you should know about your benefits
Why did I get two Social Security checks this month?
If you’re owed overdue payments, you could get two checks, according to GOBankingRates, a personal finance website. Also, if you receive pension or disability benefits, as well as Supplemental Security Income or SSI, because your income is below certain thresholds, you may also receive two payments.
How to apply for disability
People who can’t work because of a medical condition expected to last at least a year or result in death are eligible for Social Security Disability Insurance benefits as long as they worked long enough, says SSA. Once a disability begins, a worker must wait five months before receiving benefits.
You can apply for benefits online or by calling 800-772-1213. The SSA will send your application to a state agency that makes the decision based on information your doctors provide. Seventy percent of claimants are rejected in their initial application, according to Disability Benefits Help, a group that provides information to claimants and rejected ones.
Understand your statement:What your statement about Social Security benefits tells you and what it doesn’t
But denials can be appealed, and the success rate of appeals is much higher, according to Disability Benefits Help. Many people hire attorneys to help with their appeals.
People with disabilities can also receive benefits under the Supplemental Security Income program, which is based on financial need.
Contributors: Robert Powell and Elisabeth Buchwald