Social Security, the federal program that has provided support for American retirees for almost 90 years, is set to undergo some changes in 2024. While some of these changes are positive, there is one particular change that may not be well-received by the public.
The first major change to Social Security in 2024 is an increase in benefits for retirees. In January, the Social Security Administration (SSA) announced a cost-of-living adjustment (COLA) of 3.2%. This adjustment is aimed at preventing the erosion of the buying power of Social Security benefits due to inflation. Although this increase is smaller than the 8.7% adjustment in 2023, it is still the third-highest increase in the past 11 years. However, the timing of this increase may not be ideal as it will not help retirees cover the higher bills they have already faced in 2023. Additionally, the COLA may not fully offset the rising costs of healthcare for seniors.
Another positive change coming to Social Security in 2024 is higher earnings limits for early retirees. The earnings limits for individuals who start receiving retirement benefits before their full retirement age (FRA) will be raised. Currently, the Social Security Administration deducts $1 from benefits for every $2 earned above a specified threshold. In 2023, this threshold was $21,240, but it will increase to $22,320 in 2024. Similarly, during the year a person reaches their FRA, benefits are reduced by $1 for every $3 earned above another specified limit. This limit will increase from $56,520 in 2023 to $59,520 in 2024. This change will provide more disposable income for early retirees who continue to work.
However, not all changes to Social Security in 2024 are positive. One change that may not sit well with some Americans is the increase in earnings subject to payroll taxes. Currently, only the first $160,200 of income is subject to the Federal Insurance Contributions Act (FICA) payroll tax that supports Social Security and Medicare. Starting in January 2024, this maximum taxable earnings limit will increase to $168,600, representing a 5.2% jump. While most people will not be affected by this change, as their income falls below the new threshold, it will impact those who earn more than $168,600. Approximately 11.5% of U.S. households earned $200,000 or more in 2022, and an additional 8.7% earned between $150,000 and $199,999.
In addition to these changes, it is worth mentioning that no actions will be taken to address Social Security’s long-term financial stability. The Congressional Budget Office predicts that Social Security’s combined trust funds will run out of money by 2033, after which benefits may need to be reduced by 25% unless measures are taken to strengthen the program’s finances.
In conclusion, Social Security will experience both positive and negative changes in 2024. Increased benefits for retirees and higher earnings limits for early retirees are welcomed improvements. However, the increase in earnings subject to payroll taxes may not be well-received by some Americans. Furthermore, the lack of action to address Social Security’s financial challenges remains a concern.
