Beneficiaries and contributors as well as those planning to retire should be aware of three main changes that will be coming next year. These will affect how much the SSA the pays out each month, the maximum that has to be paid in and how long you have to wait to claim benefits in order to receive the full amount.
The Social Security Administration sends monthly payments to tens of millions of Americans each month from Old Age benefits to retired workers to survivor benefits to contributors’ spouses and children as well as disability benefits. The money for these is paid out of a fund that American workers pay into through their payroll taxes each month.
These are the 3 main changes in Social Security expected in 2024. How do they affect your pocket?
Concerns over inflation eroding benefits led to legislation that automatically adjusted on an annual basis what beneficiaries received each month starting in 1972. However, a long period of rising inflation saw price increases, and the cost-of-living adjustment (COLA) increase, spike after the law went into effect.
In the 1980s there were serious concerns about the solvency of the trust fund that Social Security benefits are paid out of would be depleted within a matter of years. That in turn led to legislation in 1983 that gradually increased the age of eligibility while maintaining retirement benefits levels.
That is reason behind the changes that will affect Social Security in 2024.
Social Security benefits will increase in 2024
The annual COLA increase for 2024 of 3.2 percent will see the average monthly benefits for retired workers, currently $1,840 according to the SSA’s monthly snapshot in August 2023, rising by $59. The boost to monthly payments will be higher or lower depending on the amount each beneficiary receives based on several factors the SSA uses to calculate benefits.
The maximum contribution amount will increase
The 2024 COLA increase doesn’t just apply to benefits but also to contributions raising the maximum amount of income that can be taxed. Unlike Medicare payroll taxes, contributors to Social Security can only be taxed on a certain amount of income by law.
The payroll tax for Social Security is 6.2 percent, which will apply to $168,600 maximum taxable earnings. The cap in 2023 was $160,200, meaning that high earners will be on the hook for $520.80 more with a top Social Security tax bill of $10,453.20.
You may have to wait longer to claim full benefits
Americans have to be at least 62 years old, for at least one month, in order to claim Social Security benefits. However, they will be penalized with smaller monthly payments than they would have otherwise been eligible for had they waited until Full Retirement Age.
Furthermore, every year the Full Retirement Age increases by two months. That means that in 2024 only those born in the first three months on 1958 will be able to qualify for Full Retirement Age, which is 66 and 8 months for those born in 1958, taking into account that you must wait a full month from your birthday to qualify. The Full Retirement Age will keep increasing until it reaches 67 for those born in 1960.
Those that aren’t quite ready to retire can increase their maximum Social Security benefits if they keep working until they are 70.
