Millions of older adults rely on Social Security to make ends meet in retirement, and for some, benefits are their sole income source.
Changes to the program can affect how much you receive, however, so it's wise to stay updated on what's happening with Social Security. As we head into 2024, there will be some adjustments to watch out for. While some of them could increase your benefit amount, others are not quite so positive.
1. There's a new COLA for 2024
Most years, beneficiaries will receive a cost-of-living adjustment (COLA) to keep benefits keep up with inflation. In 2024, you can expect a 3.2% increase.
Image source: Getty Images.
The downside is that that's much smaller than last year's whopping 8.7% raise. However, the positive is that because the COLA is based on inflation, a smaller adjustment means that costs have not increased as much compared to last year. So while you can expect only marginally larger checks in 2024, that also means everyday expenses are becoming more affordable.
2. The maximum benefit is going up
In 2024, the maximum you'll be able to receive from Social Security is $4,873 per month -- up from $4,555 per month this year. If you're able to reach those maximum payments, that means your annual benefit will be increasing by nearly $4,000 next year.
However, achieving those max payments is becoming more difficult. To earn as much as possible from Social Security, you'll need to have worked for at least 35 years, delay claiming until age 70, and consistently reach the wage cap -- which is the highest income subject to Social Security taxes.
The wage cap changes from year to year to account for inflation. It's $160,200 per year in 2023, and in 2024, it will increase to $168,600 per year. This is often the toughest requirement for workers to meet, and it's only getting more challenging every year that the income limit increases.
3. The earnings test limit is increasing
If you're continuing to work after taking Social Security, your benefits could be reduced or withheld entirely, depending on how much you're earning from your job. The earnings test limit determines how your income will affect your benefits, and these limits change annually.
There are two different limits, depending on whether you will or will not reach your full retirement age (FRA) in 2024. The good news is that they're both going up.
| Income Limit in 2024 | Income Limit in 2023 | |
|---|---|---|
| If you won't reach your FRA in 2024 | $22,320 | $21,240 |
| If you will reach your FRA in 2024 | $59,520 | $56,520 |
Data source: Social Security Administration. Table by author.
If you won't reach your FRA in 2024, your benefits will be reduced by $1 for every $2 you earn over $22,320 per year. If you will be reaching your FRA next year, you'll see a reduction of $1 for every $3 you earn above a different limit of $59,520 per year.
Because both of these limits are increasing next year, that means you'll be able to earn more before your benefits are reduced.
Also, keep in mind that these limits only apply when you're under your FRA. Once you reach your FRA, the Social Security Administration will recalculate your benefit amount to account for the money that was withheld, and your payments will no longer be reduced regardless of how much you're earning.
A new year brings new changes to Social Security, and now is the time to start thinking about how they'll affect your benefits. When you know what to expect heading into 2024, you can ensure you're ready for these changes once they take effect.
