Mitch's Mailbox

August 11th, 2022

3 Changes to Social Security That May Affect Your Retirement Plan

Share
Subscribe

Tom and Bessie O. from Toledo, OH asks: Hello Mitch, my wife and I are set to retire in a couple of years, and were wondering if there have been any changes to the Social Security program, we should be made aware of. It feels like changes are always happening and they’re hard to track down, so thought we’d just ask an expert. Thank you!

Mitch’s Response:

Thanks for writing, and congratulations on your upcoming retirement! That’s great news.

It’s smart that you are asking about Social Security Retirement Benefit details, as they do change from time to time. Understanding the Social Security landscape is especially important if the monthly benefit is a key part of your retirement income plan. There are almost always actions you can take to make sure you maximize the benefit relative to your specific needs.

There are three changes to the Social Security program that I think you and other readers should be made aware of.

The first is the cost-of-living adjustment (COLA), which is already built-in to the Social Security program. In other words, no action is needed from you to ensure your benefit periodically moves higher with the COLA. 2023 will make for a very interesting year as it relates to the cost-of-living adjustment, since this figure is based on inflation. As we all know, inflation is running at 40+ year highs, and that means the COLA in 2023 could also be significant. The 2023 benefits increase looks like it could come in at a little over 10%, which means a retiree receiving a $1,500 monthly benefit can expect it to be around $1,700 next year. Again, this adjustment will happen automatically.1

How to Navigate Your Retirement in this Bear Market?

Navigating through a bear market is not easy for investors, especially those nearing retirement. Instead of making sudden moves based on fear, you can potentially avoid the most harmful hazards of a bear market by using some of the useful tools we offer in our free guide – The Zacks Bear Market Survival Kit.2

In this guide, you’ll get our viewpoint on the most important moves you can make to weather a bear market. This guide discusses some key tools to prepare for a bear market, including:

Don’t wait—if you have $500,000 or more to invest, get this guide today!

Download The Zacks Bear Market Survival Kit.2

The second notable change to Social Security is for people who are still working, which applies to you as you are still in the workforce. Every year, Social Security taxes are applied to income, but the taxes stop being collected at a certain income level. In 2022, that level was $147,000, but it is set to move higher in 2023. That’s because the income subject to Social Security taxes is also adjusted based on the National Average Wage Index, which has been moving higher in this tight labor market. Inflation has been going up, and wages have been going up, which means COLA and the income threshold for Social Security taxes goes up, too.

Finally, the third change you should be aware of is that the Full Retirement Age (FRA) is ticking up. The FRA is the age at which you receive 100% of the monthly Social Security Retirement Benefits you see on your Social Security statements. The FRA is very important because if you choose to start taking your benefits before you reach the FRA, your benefits will be lower. For example, a person who decides to start taking Social Security at age 62 will only receive 70% of the monthly benefit detailed on their statement.

On the other hand, waiting to start your Social Security benefits means received more than 100% of the planned benefit. A person who waits until age 70 to start Social Security would receive 124% of the planned benefit, a meaningful increase. The detail to note now is that for anyone born in 1960 or later, the FRA is now 67.

Another concern investors nearing retirement may have is understanding how to navigate through a bear market. It’s important to remember that volatility is a natural (if unpleasant) part of the economic cycle, so instead of letting fear of a bear market manage your investment decisions, you can avoid the most harmful hazards of it by making use of some useful tools in our free guide, “The Zacks Bear Market Survival Kit.3 These tools include:

If you have $500,000 or more to invest, get our free guide today. You’ll get our viewpoint on the most important moves you can make to weather a bear market. Don’t wait—get this guide today!

Disclosure

1 USA Today, July 26, 2022, https://www.usatoday.com/story/money/personalfinance/retirement/2022/07/26/social-security-changes-2023/50523799/

2 ZIM may amend or rescind the “The Zacks Bear Market Survival Kit.” guide for any reason and at ZIM’s discretion.

3 ZIM may amend or rescind the “The Zacks Bear Market Survival Kit.” guide for any reason and at ZIM’s discretion.


DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

Questions posed are for demonstrative and informational purposes only and may not reflect the views of current clients or any one individual.
READ PREVIOUS
3 Investing Categories for this High Inflation/Rising Rate Market 
READ NEXT
Inflation Falls, Wages Rise, Productivity Declines

Explore Zack’s Archives

View
Mitch's Mailbox
September 26th, 2022
Making the Financial Transition into Retirement
Read more
Mitch on the Markets
September 26th, 2022
What Earnings Estimate Declines Mean for Markets
Read more
Private Client Group
September 26th, 2022
Fed’s Rate Hikes, Softening Housing Market, Retail Sales Rise
Read more
Mitch on the Markets
September 19th, 2022
The Bear Market in Bonds
Read more
Uncategorized
September 19th, 2022
August Inflation Higher Than Expected, More Rate Hikes, U.S. Dollar Remains Strong
Read more
Mitch's Mailbox
September 15th, 2022
What Tax Benefits Will Households See with the Inflation Reduction Act?
Read more

Daily financial tips directly
from the Zacks family.

Top

Search

Contact

I'm a Private Client I'm a Financial Professional