New year, new Social Security shakeups!
Social Security is one of the longest-running and most important governmental programs in the US. and it’s constantly changing and adapting to keep up with the new economic circumstances. In fact, the program changes so regularly that learning the basics about how it operates isn’t enough.
You also have to keep an eye on the annual updates so you don’t get caught off guard by Social Security shakeups you didn’t know about. These can affect everything from how your benefit will change on a year-to-year basis to how much payroll tax gets deducted from your paycheck, among other modifications.
This being said, we’ve made a list of the Social Security shakeups for 2024, as well as the positive changes. Check this out!
1. Cost-of-Living Adjustment
Every year, the Social Security Administration adjusts the amount of Social Security paychecks in response to rising inflation. The change is called cost-of-living adjustment, or COLA, and it reached a record level of 8.7% in 2023.
For 2024, however, the COLA will only be 3.2% because inflation has fallen. With the increase, the average benefit payout will increase by $49, going up to $1,907 from 2023’s $1,858, the SSA said.
This is one of the most anticipated Social Security shakeups of 2024, and while the increase isn’t big, it’s better than nothing.
By the way, here’s a book from which you can learn the basics of Social Security.
2. Supplemental Security Income Increase
Next on the Social Security shakeups of 2024, we’re going to talk about the Supplemental Security Income Increase. Just like Social Security retirement paychecks increase to match inflation, so too do Supplemental Security Income (SSI) benefits.
The 2024 increase is the same as with COLA, or 3.2%. As SSI paychecks don’t vary per beneficiary like retirement benefits do, the SSA publishes a table showing exactly what the SSI recipients will get this year.
This being said, essential persons will get $472 per month, or $5,673.73 per year. Qualifying individuals will get $943 per month, or $11,321.49 per year. Qualifying couples will get $1,415 per month, or $16,980.36 per year.
SSI resource limits remain the same as they were in 2023, at $2,000 for individuals and $3,000 for couples. There’s one change, though: the SSI student exclusion jumps to $2,290 per month, or $9,230 per year, up from $2,220 and $8,950, respectively, in 2023.
3. Disability Bracket Increase
While Social Security is mostly known for the retirement benefits it pays, it doesn’t do just that. It’s also an important source of financial safety for those who qualify as disabled. There are several qualification requirements for disability benefits, but one of the conditions is that you can’t earn above a specific amount and still be eligible as a disabled person.
Similar to other Social Security shakeups, the earnings threshold for disability benefits changes every year. Blind people will receive $2,590 per month in 2024, up from $2,460 per month in 2023. Non-blind people will receive $1,550 per month, up from $1,470 per month. The payment for the trial work period is $1,110 per month, up from $1,050 per month.
Read on to discover other Social Security shakeups!
4. Increase in Social Security Wage Base
Social Security is mostly funded by payroll taxes on current workers. However, there’s a threshold for how much of your earnings are subject to Social Security taxes. This limit is known as the Social Security Wage Base, and it’s also updated every year in response to rising inflation.
For some people, this may be one of the biggest Social Security shakeups. If in 2023 the threshold was $160,200, in 2024 it rises to $168,600. In other words, if you earned more than $160,200 in 2023, you won’t be required to pay the Social Security payroll tax on the amount exceeding that limit. This can result in significant tax savings for those who make more money than the wage base.
Take, for instance, an employee with an annual salary that exceeds by $10,000 the wage base. In this case, they would save an impressive amount of $620 on Social Security taxes. Meanwhile, someone who earns wages exceeding the base by $30,000 would get a $1,860 tax break. (In other words, the more you earn over the wage base, the more money you save on Social Security tax.).
This wage base increase is one of the most important Social Security shakeups, and it goes up each year as the national average wage index increases. When that occurs, which is almost annually, more income is subject to the Social Security tax.
5. Increase in Maximum Benefits When Retiring at Full Retirement Age
The size of the Social Security benefit primarily depends on a person’s full retirement age and the size of the person’s lifetime earnings. The more you earn and the longer you hold off claiming retirement benefits, the bigger the monthly paycheck you’ll receive.
Despite the Social Security shakeups that may change some thresholds or requirements, some things stay the same. What you should know is that the SSA gathers data on up to 35 of the years you earned the most.
The agency indexes those earnings for inflation so that income you earned in, let’s say, 1995 is revised to reflect what that income will not be worth in today’s dollars. The money you make after age 60 that qualifies as one of your highest-earning years is also included at its actual value.
As you may now know, the SSA decreases your benefit if you retire before reaching your full retirement age, and it boosts your benefit if you delay retirement until after your full retirement age (but only up to age 70).
This may not be among the most important Social Security shakeups of this year, but it’s still essential to be aware of it.
6. Latest Updates on Future Social Security Cuts and Potential Insolvency
Every year, the Congressional Budget Office releases information on the solvency of the Social Security program. The ongoing payroll taxes will always continue to fund retirement benefits, at least partially, but financial experts warn that the Trust Funds themselves are anticipated to be depleted by 2033.
This is one of the most serious Social Security shakeups that will definitely affect all of us, no matter our age. Experts explain that the only viable solution would be to cut the benefits by 25% by 2034.
Basically, this means that Social Security will only be able to afford scheduled payments until 2034. At that point, the fund’s reserves will run dry, and payroll taxes will only cover 77% of the benefits owed. That doesn’t mean the program will run out of money entirely, though.
If the funding gap isn’t filled, retirees could receive lower Social Security paychecks, or workers may need to pay more into the system.
7. Change in Retirement Earnings Test Limits
Last but not least on our list of Social Security shakeups in 2024 is the one related to the earning test limit. While you’re allowed to work after you apply for retirement benefits, if you earn too much, your paycheck is temporarily reduced.
Specifically, the SSA will slash your retirement benefit by $1 for every $2 you make over the limit while you’re younger than your full retirement age. In the year you’re at your full retirement age, the SS will reduce your paycheck by $1 for every $3 you make over the retirement limit. However, a separate threshold is used for this calculation.
For 2024, the earnings limit for workers who are younger than their full retirement age is $22,320, up from $21,240 in 2023. The earnings limits for those working in the year they reach full retirement age are $59,520, up from $56,520 in 2023.
Similar to other Social Security shakeups in 2024, this one will affect a certain number of beneficiaries.
Keep in mind that as soon as you reach full retirement age, there are no longer any income caps for payout reductions. Also, once you reach full retirement age, any payouts that have been deducted are reincorporated into your ongoing monthly paychecks. They are not lost or forfeited.
If you liked our article on Social Security shakeups in 2024, you may also want to read Retirement Milestones: 11 Important Age Deadlines.