[Ohio-Talk] Social Security Announces 8.7 Percent Cost-of-Living Adjustment for 2023, by NFB Advocacy and Policy Department

[Suzanne Turner]

Social Security Announces 8.7 Percent Cost-of-Living Adjustment for 2023

 

by NFB Advocacy and Policy Department

 

It's that time of year again when we provide you with information regarding
annual adjustments to the Social Security Disability Insurance (SSDI) and
Supplemental

Security Income (SSI) programs. In 2023, approximately seventy million
Americans will see an 8.7 percent cost-of-living adjustment (COLA) increase
in their

benefit amounts. Thus, come January, monthly checks will be higher.

 

The 2023 amounts are below, along with some general concepts pertaining to
the Social Security and Medicare programs, in case you want to better
understand

or refresh yourself about your rights. The COLA (if any) is based on the
consumer price index (CPI-W), which measures the rate of inflation against
the

wages earned by the approximately 173 million workers across the nation over
the previous four quarters starting with the third quarter of the previous

year.

 

Tax Rates

 

FICA and Self-Employment Tax Rates: If you are employed, you know that you
do not bring home everything you earn. For example, 7.65 percent of your pay

is deducted to cover your contribution to the Old Age, Survivors, and
Disability Insurance (OASDI) Trust Funds and the Medicare Hospital Insurance
(HI)

Trust Funds, 6.20 percent covers OASDI, and 1.45 percent is contributed to
the HI Trust Funds. Additionally, your employer is required to match this
7.65

percent for a total of 15.30 percent. 

 

For those who are self-employed, there is no "employer" to match the 7.65
percent, which means a self-employed individual pays the entire 15.30
percent

of their income. These numbers will not change in 2023 regardless of whether
an individual is employed or self-employed. As of January 2023, individuals

with earned income of more than $200,000 ($250,000 for married couples
filing jointly) pay an additional 0.9 percent in Medicare taxes; this does
not include

the above amounts.

 

Maximum Taxable Earnings

 

There is a ceiling on taxable earnings for the OASDI Trust Fund, which was
$147,000 in 2022 and will increase to $160,200 in 2023. Thus, for earnings
above

$160,200, there is no 6.20 percent deducted for OASDI. As for Medicare,
there is no limit on taxable earnings for the HI Trust Fund.

 

Social Security Disability Insurance (SSDI) Quarters of Coverage

 

The OASDI Trust Fund is kind of like an insurance policy. You have to pay a
premium to participate. Therefore, to qualify for Retirement, Survivors, or

Disability Insurance benefits, an individual must pay a minimum amount of
FICA taxes into the OASDI Trust Fund by earning a sufficient number of
calendar

quarters to become fully insured for Social Security benefits.

 

In 2022, credit for one quarter of coverage was awarded for any individual
who earned at least $1,510 during the year, which means that an individual
would

need to earn at least $6,040 to be credited with four quarters of coverage.
In 2023, the amount increases to $1,640 for one calendar quarter or $6,560

to earn four quarters of coverage for the year.

 

A maximum of four quarters can be awarded for any calendar year, and it
makes no difference when the income is earned during that year. Basically,
the

taxes you pay into the OASDI and HI Trust Funds are your premiums to take
part in the Social Security and Medicare programs. The total number of
quarters

required to be eligible for benefits depends on the individual's age. The
older the individual, the more quarters are required. Furthermore, a higher
average

income during an individual's lifetime means a higher Social Security or
SSDI check when benefits start. Remember the above quoted numbers for
quarters

of coverage to become fully insured are only minimum amounts. 

 

Trial Work Period (TWP)

 

This concept is often misunderstood. The amount of earnings required to use
a trial work month is not based on the earnings limit for blind
beneficiaries

but instead on the national average wage index. In 2022, the amount required
to use a TWP month was only $970, and this amount will increase to $1,050

in 2023. 

 

If you are self-employed, you can also use a trial work month if you work
more than eighty hours in your business, and this limitation will not change

unless expressly adjusted.

 

Substantial Gainful Activity (SGA)

 

The earnings limit for a blind beneficiary in 2022 was $2,260 per month and
will increase to $2,460 in 2023. Again, it's important to remember this is

not the amount of money an individual makes to use a trial month. This is to
say that the TWP can be exhausted even if your income is well below $2,460

per month. See the above information about the TWP.

 

In 2023 a blind SSDI beneficiary who earns $2,460 or more in a month (before
taxes but after subtracting un-incurred business expenses for the
self-employed,

subsidized income for the employed, and impairment-related work expenses)
will be deemed to have exceeded SGA and will likely no longer be eligible
for

SSDI benefits.

 

Supplemental Security Income (SSI)

 

The federal payment amount for individuals receiving SSI was $841 in 2022
and will increase to $914 in 2023. For married couples, the federal monthly
payment

amount of SSI will increase from $1,261 to $1,371.

 

Student Earned Income Exclusion

 

In 2022, the monthly amount was $2,041 and will increase to $2,220 in 2023.
The annual amount was $8,231 in 2022 and will be $8,950 in 2023. The asset

limits under the SSI program will remain unchanged at $2,000 per individual
and $3,000 per married couple.

 

ABLE Act

 

Signed on December 19, 2014, the ABLE Act has a significant impact on
resource limits associated with the SSI and Medicaid programs for those who
were

blind or disabled by the age of twenty-six. Traditionally, SSI beneficiaries
have been required to adhere to strict resource limits: such as a maximum

of $2,000 in the bank for an individual receiving SSI benefits. Under the
ABLE Act, however, the amount deposited in an ABLE Account can be much
higher.

ABLE Account contributions must be designated specifically for purposes such
as education, housing (with a cautionary warning to follow), employment
training

and support, assistive technology, health, prevention and wellness,
financial management, legal fees, and funeral and burial expenses. The
required implementing

regulations are being enacted in most states. Check with your financial
institution of choice for a status of ABLE Act regulations in a specific
state

and to see if an ABLE account is right for you.

 

As to the warning about ABLE Account contributions for housing, it is
important to note that SSI beneficiaries may still face the traditional
$2,000 resource

limit for ABLE Account funds designated for housing. Thus, SSI beneficiaries
should consider the many other purposes not subject to the traditional
resource

limits when making ABLE Account contributions, since there are also tax
advantages associated with ABLE accounts.