
Social Security Changes in 2024
With every New Year, brings some kind of change to Social Security benefits to the estimated 21.7 million people that need it most. Social Security has been constantly evolving over the past eight decades. And thus, why we bring you the biggest changes for 2024. Most of these changes are positive bringing people a financial lift, however, a couple will have the opposite effect.
Important Changes for Social Security in 2024
- COLA increase means so do Social Security checks
In 2023 we saw inflation cool off just a tad; however, consumer prices still increased. Therefore, the cost-of-living adjustment (COLA) for 2024 comes in at 3.2%. Not nearly as significant as last year’s 8.7% COLA due to the drastic rise in goods and services. Although this year’s COLA still comes in higher than the average of 2.6% over the past 20 years.
For the typical retired worker, it means an extra $59 per month this year. Workers with disabilities and survivor beneficiaries can expect their monthly Social Security check to increase by $48 and $47, respectively.
- Larger tax bill for high earners
Those with higher salaries will be impacted by the Social Security payroll tax. The maximum amount of earnings in 2024 will increase to $168,600. Workers pay a 7.65% FICA tax from their paychecks, with 6.2% of that going to Social Security. About 6% of workers who pay Social Security taxes have earnings above the taxable maximum each year, CNBC reported, citing Social Security Administration data.
If you are employed you pay half of that rate (via FICA withholding from your paycheck) and your employer covers the rest. If you’re self-employed, you pay both shares as part of your annual tax return.
- Higher earnings test
After filing for Social Security retirement benefits, if you continue working you might be subject to an earnings test if you earn a certain amount of money. This threshold changes each year. The SSA reports that in 2024, the earnings exempt from the retirement earnings test will increase to $22,320 from $21,240 in 2023. For every $2 in earnings above that limit, $1 in benefits will be withheld from payment. These earnings rules no longer apply once you hit full retirement age.
- Maximum Social Security benefit increasing
For a worker retiring at full retirement age, or the age they are eligible for 100% of their monthly payout, the maximum Social Security benefit for will rise to $3,822 in 2024 from $3,627 in 2023, according to CPA Practice Advisor. This affects only those who claim benefits at FRA, which is currently either 66 or 67, depending on birth year. The Social Security Administration (SSA) notes that about 2% of eligible beneficiaries qualify for this maximum payout. Those who claim benefits earlier receive smaller monthly payments.
A retired worker needs to do the following to receive the maximum payout:
- Wait until full retirement age to claim benefits
- Work at least 35 years since the Social Security Administration (SSA) takes the highest earing within the 35 years, inflation-adjusted, when calculating benefits
- Reach, or surpass, the maximum taxable earnings cap in the 35 years taken into consideration by the SSA
- Disability income thresholds are rising
Each year the Social Security Disability’s limit also changes most years. Workers with long term disabilities that can no longer fulfil their job, and therefore cannot provide for themselves, qualify for additional financial help.
in 2024, non-blind workers with a disability can earn up to $1,550 per month ($960 extra per year) without a stoppage to their monthly payout. Those blind workers with disabilities will see their insurance benefits increase even more to a $2,590 max per month threshold.
Nasdaq explains that widowed mothers with two children will see average benefits increase to $3,653 a month in 2024 from $3,540 in 2023, according to the SSA. For aged widows and widowers living alone, average benefits will rise to $1,773 a month from $1,718. For a disabled worker with a spouse and one or more children, the average monthly benefit will increase to $2,720 from $2,636.
- Qualifying for Social Security benefits has become challenging
Americans earn their right to Social Security retirement benefits from working throughout their life. Social Security credit is earned each year by doing “covered” work — a job or self-employment in which you pay Social Security taxes on your income. However no more than four work credits can be earned each year. Although the years do not need to be consecutive, it takes 40 credits, or 10 years of covered work to fully qualify for retirement benefits.
In 2023 to receive one lifetime work credit it took $1,640. So, $6,560 in earned income, or $1,640 times 4, is the equivalent in maxed out credits that year. You can earn up to 4 credits in 2024 at $1,730 in earned income per quarter to qualify. That’s $6,920 accrued in wages for the full credits this year.
- Medicare premium offset
Chances are you have premiums for Part B, which is the part of the federal health care program that covers doctor visits and other outpatient services, deducted directly from your Social Security payments. That means an increase in Medicare premiums can undercut your cost-of-living adjustment.
In 2023, beneficiaries got a rare respite from that offset effect as the big COLA was accompanied by a drop in Medicare premiums. But, in 2024 the offset is back. The standard monthly Part B rate rising from $164.90 to $174.70, shaving about $10 a month off the COLA gain.
- 2 Fewer States
Social Security benefits are taxed in certain states. With the turn on 2024, two states are no longer taxing Social Security benefits. Dan Caplinger noted three weeks ago that Nebraska and Missouri have shelved their respective Social Security taxation. Meaning this leaves 10 states that may still tax Social Security benefits based on preset income limits.
The provisional income threshold associated with the federal taxation of Social Security benefits has been holding steady for decades. The two tiers of federal benefit taxation, which were respectively introduced in 1983 and 1993, have never been adjusted for inflation. With the 2023 Social Security Board of Trustees Report pegging the program’s long-term funding obligation shortfall at a staggering $22.4 trillion, it’s highly unlikely reform is on the horizon.
Contact Lowery Law Group at info@lowerylegal.com or call (843) 991-0733. There is no fee for a free consultation regarding your claim. Lowery Law Group is experienced in handling cases in South Carolina as well as Georgia.