Social Security is an essential part of the financial support system for tens of millions of older Americans. The regular income that Social Security provides makes up a huge fraction of the financial resources for many people who have retired.
Social Security typically goes through some changes from year to year. As you'll see below, some key changes to Social Security in 2024 will help recipients, but others could have an adverse impact on your finances. Be prepared by reading through these three key changes to Social Security that will take effect in January.
1. Expect a 3.2% boost to benefits in 2024 thanks to the cost-of-living adjustment
Unlike most traditional pensions, Social Security payments are tied to inflation. Every year, the Social Security Administration (SSA) looks at changes in one measure of consumer prices to figure out the amount of the annual cost-of-living adjustment, or COLA for short. When inflation is high, the COLA tends to be larger. When inflation is low, COLAs can be small or even zero.
In 2024, the COLA will be 3.2%, according to the latest from the SSA. What that means is that the typical retired worker will see benefits go up by $59 per month to an average of $1,907. The typical couple for which both spouses are getting benefits will see about a $94-per-month increase to $3,033, while widowed parents with two children could get an average $113 bump in total family benefits to $3,653 per month.
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2024's 3.2% COLA will be far less than the 8.7% that Social Security recipients received at the beginning of 2023. That shows how much inflation has gone down in the past 12 months, but the 3.2% figure is still above the average over the past 20 years or so.
2. Social Security's maximum benefit will be $4,873 in 2024
If you're retiring in 2024, your maximum Social Security benefit will be quite a bit higher than it was for those who retired in 2023. Those retiring at age 62, which is typically the earliest eligibility date, will qualify for up to $2,710 in monthly benefits, up $138 from the maximum in 2023.
Those waiting beyond 62 to claim benefits could see even higher maximums. Those who wait until age 70 could see a massive increase, with the maximum rising $318 to $4,873 per month. If you retire at 65, your maximum will go up $147 to $3,426. Those retiring at 66 and 67 will get increases of $146 and $103, respectively.
3. High-income workers could pay a lot more in Social Security payroll taxes
Most of Social Security's revenue comes from payroll taxes, and there's going to be a sizable jump in the maximum amount of tax per worker in 2024. The wage base, which establishes the earnings limit for payroll tax collection, is going up by $8,400 to $168,600.
Employees making that much or more can expect to see $520.80 more withheld from their total paychecks in 2024 than they saw in the past year. Self-employed individuals are responsible for both the employee and employer portions of that payroll tax, which means double the increase, or $1,041.60. The earnings limit is high enough, though, that all but a few workers won't have to worry about paying more.
Be prepared
These changes to Social Security aren't particularly unusual, but they could have a noticeable impact on your benefits and costs. Knowing what to expect is valuable so that you don't get caught off guard by any changes that are happening.
