Social Security is undoubtedly one of the most important governmental programs. Thus, the program undergoes some changes every year to keep up with social and financial changes. The same will be the case in 2024 as well. Several changes are slated for next year, with some having a positive impact and some a negative impact on recipients. This article will discuss major Social Security changes in 2024 and how they will impact recipients.
Following are the major Social Security changes in 2024 that will impact recipients:
Above-average cost-of-living adjustment
The SSA (Social Security Administration) uses annual cost-of-living adjustments (COLAs) to protect the benefits from inflation. For 2024, the cost-of-living adjustments will be 3.2%. Although the adjustment is much smaller than the 8.7% COLA in 2023 and the 5.9% COLA in 2022, it still is well above the last 10-year average of 2.6%.
Social Security recipients would have received a COLA notice in their mail this month, informing them about the updated benefit amount after the COLA adjustment. In case you haven’t received the notice or somehow missed it, you can check the details online as well in the Message Center of your my Social Security account.
The Social Security program is funded through a dedicated payroll tax, and the current law limits the amount of income subject to Social Security payroll tax. This means that some people don’t pay Social Security tax on all of their income.
This maximum taxable earnings limit is adjusted annually to account for the changes in general wage levels. For 2023, the maximum taxable earnings limit was $160,200. This means that people pay Social Security taxes on all income up to $160,200, and any income above that limit is tax-free.
For 2022, the maximum taxable earnings limit was $147,000, while for 2024, it will be $168,600. So, some workers will have to pay Social Security tax on an additional $8,400 next year (compared to 2023). Assuming a tax rate of 6.2%, workers could pay about $520 more in taxes next year.
In 2024, the maximum Social Security benefit for a person retiring at full retirement age (FRA) will increase to $3,822 from $3,627 in 2023, according to SSA. It must be noted that the increase in the maximum benefit will affect only those who claim benefits at FRA. Currently, the FRA is either 66 or 67, depending on the birth year.
Higher Retirement Earnings Test limits
Social Security recipients face an earnings test if they continue to work even after claiming benefits. If the test finds that they earn more than the set limit, their payout is temporarily reduced.
Specifically, the SSA reduces the benefit by $1 for every $2 you earn above the set limit until you reach your FRA. Separately, the SSA reduces $1 for every $3 you earn over the retirement limit once you reach full retirement age.
In 2024, the earnings limit, after which the SSA starts to reduce the benefit temporarily, has been increased to $22,320, up from $21,240 in 2023. The earnings limit in the year when a recipient reaches FRA has been increased to $59,520, up from $56,520.
Once you reach FRA, there are no income restrictions. Also, the payout that the SSA forfeited before you reach FRA is added back to your ongoing monthly payments after the FRA.
Higher spousal and disability benefits
The average benefit for a widowed mother with two children will increase to $3,653 per month next year from $3,540 in 2023. Moreover, the average benefit for aged widows and widowers living alone will rise to $1,773 from $1,718 in 2023. Similarly, the average monthly benefit for disabled workers with a spouse and one or more children will rise to $2,720 from $2,636, according to SSA.
Increase in Supplemental Security Income (SSI)
Similar to Social Security retirement payouts, the SSI payments are adjusted for inflation each year. The increase in SSI is the same as the COLA adjustment, i.e., 3.2% for 2024. However, unlike the Social Security retirement benefits, the SSI payouts don’t vary per recipient.
Thus, the SSA annually publishes a table showing the exact amount that SSI recipients will get each year. For 2024, the SSI payment for individuals will increase to $943 a month from $914 in 2023, while for couples, it will increase to $1,415 a month from $1,371.
Higher disability income limit
Disability benefits are an important part of Social Security, and a person needs to meet several requirements to qualify for this benefit. One of the most important requirements is that a disabled person must not earn above a certain amount. The income threshold changes every year, and for 2024 it is:
- $1,550 per month for non-blind, up from $1,470 in 2023.
- $2,590 monthly for blind, up from $2,460 in 2023.
- $1,110 monthly for TWP (trial work period), up from $1,050 in 2023.
Apart from the above major Social Security changes in 2024, President Joe Biden has proposed a few changes to boost the funds in the Social Security Old Age and Survivors Insurance Trust (OASI), which faces depletion by 2033. If the federal government fails to meet the shortage of funds, it could result in a reduction of benefits of up to 23% for retirees beginning in 2033.
Biden’s proposed changes include implementing a payroll tax for income over $400,000, changing the way the COLA rate is calculated, increasing the Primary Insurance Amount, and increasing the Special Minimum Benefit.
