Major Change Expected for Social Security Next Year That Many Will Disapprove Of

Social Security Considerations for Future Retirees

• Impact of Future Changes: Even if retirement is years away, potential changes to Social Security could significantly affect future benefits, leading to reduced retirement income if lawmakers do not address the program's revenue shortfall.

• Funding Sources: Social Security primarily relies on payroll taxes, with employees contributing 6.2% of their earnings and employers matching that amount, totaling 12.4%. Self-employed individuals pay both portions.

Wage Cap and Its Implications

• Current and Future Wage Cap: The wage cap for Social Security in 2023 is set at $176,100, but it is expected to increase to approximately $183,600 by 2026, reflecting wage growth. This change could impact higher earners significantly.

• Legislative Proposals: Some lawmakers are considering raising or eliminating the wage cap to address funding issues, which could further affect high-income earners in the future.

Preparing for Changes

• Planning Ahead: Individuals, especially those in high-cost areas or with higher incomes, should prepare for the potential increase in the wage cap and consider consulting with a tax professional to mitigate financial impacts.