Social Security has certain rules, but those aren't necessarily set in stone. The program tends to change from year to year in line with factors like inflation and wage growth.
In 2024, Social Security is changing in a number of important ways. And it's important to be aware of the following changes whether you're currently collecting benefits or not.
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1. Benefits are going up 3.2%
In 2023, Social Security benefits rose 8.7% in conjunction with the largest cost-of-living adjustment (COLA) to arrive in decades. In 2024, benefits are rising as well, but this time around, seniors are only getting a 3.2% boost.
The reason next year's raise isn't as substantial as 2023's is that inflation has cooled nicely over the past 12 months. Since Social Security COLAs are pegged to inflation, seniors had plenty of warning that their 2024 raise would pale in comparison to the lift their benefits got in 2023.
2. The wage cap is increasing
Workers don't necessarily pay Social Security taxes on all of their income. Rather, there's a yearly wage cap implemented that exempts higher earnings from being taxed.
This year, earnings beyond $160,200 were not taxed for Social Security purposes. Next year, however, that threshold is rising to $168,600, so higher earners will have to open their wallets even more.
3. The earnings-test limit is rising
It's possible to earn income from a job while also receiving a monthly benefit from Social Security. If you do so before reaching full retirement age (FRA), you'll need to keep your earnings to a certain limit to avoid having them impact your benefits. But once you reach FRA, you can earn any amount of money and still receive your monthly benefits in full.
In 2023, the earnings-test limit was $21,240 for seniors working and collecting Social Security ahead of FRA. It was also $56,520 for seniors in that boat reaching FRA in 2023.
In 2024, the earnings-test limit is rising to $22,320 for seniors in the former category and $59,520 for those who will reach FRA in the new year. Those who exceed the earnings-test limit will have $1 in Social Security withheld for either every $2 or every $3 earned.
Withheld benefits aren't forfeited but rather paid, once recipients reach FRA. But those on the cusp of exceeding the earning-test limit can potentially take steps to avoid having benefits withheld by adjusting their hours as needed.
4. The value of work credits is going up
To qualify for Social Security benefits in retirement, you need to earn 40 lifetime work credits. And you can earn up to four of these credits per year.
Right now, the value of one work credit is $1,640. In 2024, it will take $1,730 in earnings to earn a work credit. Those who work on a very part-time basis will need to be mindful of this change if they want to snag their four credits and set themselves up for benefits down the line.
Make sure you stay informed
Clearly, the changes that apply to Social Security in 2024 won't just impact seniors who are already receiving benefits. They also have the potential to impact workers who are nowhere close to being old enough to file. So either way, it's important to keep tabs on Social Security and make sure you know the rules.
