Social Security: Anticipating Changes in 2024 – Examining the Positive and Negative Impact

Millions of older adults depend on Social Security as their main source of income in retirement. Therefore, it is crucial to stay informed about any changes to the program that could impact the amount of benefits received. As we approach 2024, there are several adjustments worth noting. While some changes may lead to an increase in benefits, others may not be as favorable.

1. A new COLA for 2024:
Beneficiaries typically receive a cost-of-living adjustment (COLA) each year to account for inflation. In 2024, there will be a 3.2% increase in benefits. Although this is significantly lower than last year’s substantial 8.7% raise, it indicates that the cost of living has not increased as much. While the adjustment will result in slightly larger benefit checks, it also suggests that everyday expenses are becoming more affordable.

2. Increase in the maximum benefit:
In 2024, the maximum monthly benefit from Social Security will rise to $4,873, up from $4,555 this year. This means that those who qualify for the maximum payment will see an annual increase of nearly $4,000. However, achieving the maximum payments is becoming more challenging. To receive the highest possible benefit, individuals must have worked for at least 35 years, delay claiming until age 70, and consistently earn income up to the wage cap, which is the highest amount subject to Social Security taxes. The wage cap will increase from $160,200 in 2023 to $168,600 in 2024. Meeting this requirement is becoming increasingly difficult as the income limit rises each year.

3. Increase in the earnings test limit:
If you continue working while receiving Social Security benefits, your income could affect the amount you receive. The earnings test limit determines how much your benefits will be reduced or withheld based on your earnings. These limits change annually, and in 2024, both limits will increase. There are two different limits depending on whether or not you will reach your full retirement age (FRA) in 2024. If you won’t reach your FRA, your benefits will be reduced by $1 for every $2 earned above $22,320 per year. If you will reach your FRA, the reduction will be $1 for every $3 earned above $59,520 per year. With the increase in these limits, individuals will be able to earn more before their benefits are affected.

It’s important to note that these limits only apply if you are below your FRA. Once you reach your FRA, the Social Security Administration will recalculate your benefit amount, and your payments will no longer be reduced, regardless of your earnings.

As we approach the new year, it’s essential to consider how these changes to Social Security will impact your benefits. Being aware of what to expect in 2024 will help you prepare for these adjustments effectively.