While more of their income will be taxed, more of their earnings also will be credited to their future Social Security benefit. Increase in Maximum BenefitĪlthough no one wants to pay more taxes, the increase in the wage base has a silver lining for high earners. Workers should expect another bump up in 2023, meaning higher earners should expect to pay more in Social Security taxes.
The wage base in 2021, for example, was $142,800, but the high rate of inflation in 2021 pushed that number 2.9% higher. But this number is also tied to changes in inflation and is likely to go up significantly in 2023. The 6.2% OASDI tax, which funds various Social Security programs, applies only to the first $147,000 of a worker’s earnings for 2022. The wage base is the amount of a worker’s earnings that are taxable for Social Security purposes. The SSA uses the CPI-W reading at the end of the third quarter to determine the following year’s COLA, so that’s the number to keep your eye on. POLL: Are You Concerned That Social Security Benefits Will Be Reduced During Your Lifetime?Īlthough the Consumer Price Index, or CPI, is often quoted as “the inflation rate,” the Social Security Administration actually uses a variant known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. Some analysts predict the bump could be as high as 8.6%, based on current inflationary trends. But inflation in 2022 has only continued to accelerate, and it seems all but inevitable at this point that the COLA for 2023 will be even larger. The 5.9% increase in the Social Security cost-of-living adjustment in 2022 was the largest jump since the 7.4% hike in 1982, a whopping 40 years ago.
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