The most eagerly anticipated piece of Social Security news each year is no doubt the cost-of-living adjustment (COLA). Though it's too early to know what that number will be in 2024, don't expect anything close to the giant 8.7% raise beneficiaries received in 2023. Because of cooling inflation, The Senior Citizens League projected earlier this month that the 2024 COLA will be around 3.1%
Though next year's COLA won't be announced until October , there are a few other pieces of Social Security-related news you should know. Here are five changes to Social Security you probably weren't aware of.
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1. The average monthly retirement benefit is now $1,833
The Social Security Administration estimated in December 2022 that the 8.7% COLA would add $147 to the average benefit retired workers receive each month. As of March 2023, the average monthly check for retired workers was $1,833. Here's a breakdown of average monthly payments for those who receive other common types of Social Security benefits:
- Survivor benefits for non-disabled widow(er)s: $1,711
- Disabled worker benefits: $1,483
- Spousal benefits: $898
2. Medicare recipients are holding onto more of their benefits
The 8.7% COLA wasn't the only welcome piece of news Social Security recipients got for 2023. Most beneficiaries who receive Medicare -- the federal health program that covers people 65 and up, along with many people who receive Social Security Disability Insurance -- have their Part B premiums deducted from their checks. (Part B covers things like doctor's visits, out-of-patient treatment, and home healthcare.)
The standard Part B premium for Medicare enrollees dropped by $5.20 per month in 2023. That means Social Security beneficiaries who also receive Medicare have a few extra dollars in their pockets each month.
3. The Social Security wage cap is higher
Social Security taxes 6.2% of your paycheck up to a wage cap that it adjusts each year. In 2023, the wage cap increased to $160,200, up from $147,000 in 2022. Most people earn well below the wage cap, so they're still paying the same percentage of their incomes into Social Security. But if you're a high earner, Social Security can tax an extra $13,200 worth of earnings in 2023.
4. You can work more without affecting your benefits
You're allowed to work while collecting Social Security. But if you're taking benefits before full retirement age (67 if you were born after 1959) and your earnings are above a certain threshold, Social Security will withhold part of your check. In 2023, recipients can earn slightly more than they could last year without affecting their benefits. If you're working while collecting benefits early, here's how much Social Security will withhold:
- $1 for every $2 you earn above $21,240 (up from $19,560 in 2022) if you won't reach full retirement age this year.
- $1 for every $3 you earn above $56,520 (up from $51,960 in 2022) if you'll reach full retirement age this year.
5. The trust fund is projected to run dry one year sooner
Social Security's Old Age and Survivors Insurance (OASDI) Trust Fund handles retirement, survivor, and spousal benefits. When revenue from payroll taxes exceeds the benefits it pays out, the trust fund's reserves grow; when payroll tax revenue doesn't cover benefits, the fund's reserves are depleted.
For years, policymakers have warned that Social Security's reserves are running dry. And the latest trustee's report puts the date when the OASDI runs out of money at 2033, one year earlier than last year's report projected. At that point, payroll taxes would only fund 77% of promised benefits.
That doesn't mean benefits would stop altogether in 2033. But if Congress doesn't enact changes, Social Security would only be able to pay out 77% of benefits. That doesn't mean it's time to panic, as Congress has multiple options for increasing Social Security's revenue, like increasing or eliminating the wage cap or hiking payroll taxes. But if you're still in your working years, aiming to invest a bit extra in case of a shortfall is certainly a smart goal.
