: Social Security’s ‘taxable maximum’ inches higher—but will it make a dent in the trust fund?

by | Oct 13, 2022 | Stock Market

Social Security’s payroll tax cap was raised nearly 9% for 2023, meaning more income will face Social Security taxes next year, but the rise is unlikely to affect the solvency of the trusts underpinning the system. Citing the increase in average wages, the Social Security Administration said the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $160,200 from $147,000 starting in January. The announcement was part of the release of the cost-of-living adjustment, or COLA, on Thursday. The taxable maximum for 2021 was $142,800.

While the increase is sharper than in recent years, it’s unlikely the higher taxable maximum will affect the overall Social Security system, experts said. The higher taxable maximum “will generate more revenue and tax benefits from higher earning households,” said Rob Williams, managing director of financial planning at Charles Schwab. “It will contribute more to the system. Generating more income may help the solvency but we won’t know for sure until the Social Security trustees release their next report.” The Social Security and Medicare Board of Trustees issues a closely watched report every year on the financial health of the program’s two trust funds that support benefits to retired, survivor and disabled beneficiaries. In June, the most recent report said that without any changes in the next 13 years, Social Security beneficiaries can e …

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