Social Security pays benefits to tens of millions of people, and just about every American can expect to get at least some money from the Social Security system. Yet with rising concern about the long-term financial stability of the Social Security program, retirees and workers alike are watching Washington for any signs of major changes to their benefits.
Given the currently divided government, it's unlikely that new legislation will pass to impose dramatic changes to Social Security in 2024. However, even without further action from Congress and the White House, several changes are slated to take place in the coming year. Here's what every American should know about what's likely to change in Social Security come 2024.
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1. Payment amounts will rise for those receiving Social Security benefits
Social Security recipients receive a cost-of-living adjustment (COLA) in any year in which inflation lifts prices above previous-year levels. In particular, the Social Security Administration looks at a particular subindex of the Consumer Price Index during the months of July, August, and September. It then takes the average of those three months and compares it to the average of the same three months in the previous year. The percentage increase becomes the cost-of-living adjustment for the coming year.
Massive inflationary pressures during 2022 caused Social Security to give recipients an 8.7% increase in their benefits at the beginning of 2023. That was the biggest adjustment in more than 40 years, but it's unlikely to recur in 2024.
Two of the three months of 2023 inflation data is in the books, and if the September figure were to come in at the same level as the average of July and August, then the cost-of-living adjustment in 2024 would be 3%.
What's more likely, though, is that the CPI will move somewhat higher in September. It would take a massive spike to get the 2024 benefit increase above 3.5%, however, so recipients can expect to see something in that 3% to 3.5% range beginning in January.
2. High-earning workers will get taxed on more of their income
Social Security gets the vast majority of its funding from payroll taxes on current workers. Employees typically pay 6.2% of their salary into the program, with employers matching that amount with their own 6.2% levy. Self-employed workers are responsible for the full 12.4%.
However, Social Security payroll taxes only get imposed up to a limit each year. In 2023, that limit was $160,200, and it gets adjusted each year for increases in overall wage levels. 2022's number was $147,000.
Again, Americans will have to wait until final data comes in during the month of October before they'll know exactly how much the payroll tax limit will rise in 2024. However, early estimates from Social Security's Board of Trustees suggested a $7,500 boost to $167,700, and that would increase the potential maximum Social Security payroll tax for high-income earners by $465.
3. Early filers who still work could have less taken out of their Social Security checks
Finally, many people don't realize that when you take Social Security before your full retirement age, which is 67 for those born in 1960 or later, earning income from work above certain limits can cost you some of your benefits. In 2023, those not reaching full retirement age all year can earn up to $21,240 without penalty. After that, though, workers lose $1 in annual benefits for every $2 they earn above the $21,240 limit.
There are different figures for those reaching full retirement age at some point during the year. In 2023, that special limit is $56,520, and recipients lose $1 in benefits for every $3 above the threshold.
In most years, an increase in that amount close to the cost-of-living adjustment for benefits applies. A 3% to 3.5% boost to the $21,240 limit could amount to roughly $640 to $740. That could allow workers claiming early benefits to keep an extra $320 to $370 in payouts over the course of 2024.
Be smart about Social Security
With Social Security in danger, it's imperative to keep a close eye on what's happening with benefits. Even regular changes like these can have a big impact on what you receive from Social Security.
