Social Security is one of those things a lot of people don't pay attention to until there's news that impacts them. And this week, a number of important Social Security announcements are scheduled to take place -- specifically, on Oct. 12.
Oct. 12 is the day when the Bureau of Labor Statistics will release data from September's Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). That data will then be used to determine a few key changes to Social Security for 2024. Here are three to expect.
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1. A new COLA
Cost-of-living adjustments, or COLAs, were put in place years ago to help seniors on Social Security maintain their buying power in the face of inflation. In 2023, Social Security recipients enjoyed an 8.7% COLA following a year of rampant inflation.
On Oct. 12, the Social Security Administration (SSA) will announce 2024's COLA. And while it's likely to be higher than the average COLA over the past 20 years, it won't be anywhere close to 8.7%. A more likely estimate is 3% to 3.5% based on the inflation data we have so far.
2. A new earnings test limit
Seniors on Social Security who work while receiving benefits before having reached full retirement age (FRA) are subject to an earnings test limit. Going beyond that limit means having a portion of benefits withheld.
In 2023, the earnings test limit is $21,240 for Social Security recipients not reaching FRA this year and $56,520 for those reaching FRA this year. On Oct. 12, the SSA is likely to announce a higher earning test limit for 2024, giving seniors on Social Security the leeway to earn a bit more money without having to worry about benefits being withheld.
To be clear, the earnings test limit only applies to seniors on Social Security who haven't reached FRA yet. Once FRA arrives, Social Security recipients can earn hundreds of thousands of dollars a year and still receive their monthly benefits in full.
3. A new wage cap
Social Security's primary source of revenue is payroll taxes. But workers don't automatically pay Social Security taxes on all of their income. Rather, there's a wage cap that's put in place each year that cuts off those taxes at a certain point.
In 2023, earnings beyond $160,200 are not subject to Social Security taxes. Next year, that wage cap is likely to rise due to general wage growth. And it may rise substantially, which means higher earners may have to open their wallets more than they'd like to.
It's also worth noting that there's been talk of eliminating the wage cap altogether to help shore up Social Security's finances. That's not something that's going to happen on Oct. 12, but it's a change that might get implemented down the line as lawmakers work to find ways to avoid Social Security cuts.
An important day for workers and retirees alike
The Social Security changes that get announced on Oct. 12 won't just impact retirees who collect a monthly benefit -- they'll also impact workers, particularly those with higher incomes. As such, it's an important set of announcements for everyone to tune into.
