The Increase in Social Security 2023 retirees will see 8.7% more income, but those preparing to retire might not make the cut to qualify for this benefit. Social Security is an earned benefit of being a US taxpayer, but to earn eligibility you must submit to a “credit system”. Much like passing a class to receive credit toward graduation, retirees must earn 40 credits during their working years to qualify for Social Security benefits. But with the 8.7% increase, earning those 40 credits has become more complicated.
For help with your retirement plans and how Social Security fits into it, consider working with a Financial Advisor.
The History of Social Security Credits
The earning process credits to Social Security has been in play since 1978. It was the government’s way of allowing only contributing taxpayers to reap the benefits. There are three categories of beneficiaries, and all have a different required credit threshold: retirement beneficiaries, disability beneficiaries and those receiving survivor benefits.
Retired: Require the full 40 credits to qualify
Disabled recipients: Requires 6-20 credits depending on age
Survivors: Requires 6 credits
How do I earn Social Security credits?
You earn Social Security credits by working and paying Social Security taxes. When you receive a paycheck, your employer is required to provide a payslip. A pay stub acts as a detailed breakdown of your earnings and deductions such as total hours worked and expenses such as health insurance. Social security contributions are a mandatory deduction that counts towards your payroll expenses.
To retire and receive Social Security benefits, you need at least 40 credits. You are only allowed to earn a maximum of four credits per year, so the 40 credits represent 10 years. Credits are earned based on your annual income, so some may earn their four credits relatively quickly while others may need to work harder to reach their goal.
How much do I need to earn to receive a single credit?
In 2023, you will need to earn $1,640 for a single credit, totaling $6,560 for the maximum four credits. This rate changes every year as social security benefits increase. Since there was an 8.7% increase this year, 2023 will see a significant jump of $130 to earn a single credit.
To put that into perspective, other increases in previous years have been much smaller, averaging between $40 and $60.
The essential
Those who have already earned their 40 credits need not worry; your finish line has not moved. But anyone who is within ten years of retirement with little or no work experience will need to be aware of their income and credits going forward.
If you’re not sure where you stand with your credits, visit the Social Security Administration website and create a “my social security account.”
Retirement Planning Tips
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Savings are important. But you probably can’t pack enough to last all your golden years. You will need your savings to grow through investments. For assistance, contact a Financial Advisor. Our free matching tool will put you in touch with three financial advisors. You can then decide which Financial Advisor is best suited to your needs.
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Taxes can take a large chunk out of your retirement income, depending on where you live. To find out if you should move after hanging up your hat, check out our story on the best states to retire for taxes.
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