Tens of millions of people get Social Security benefits. Many of them rely on the program to provide all or the vast majority of their income in retirement. That makes it crucial to understand how much you'll get from Social Security, even though the program can be complex and hard to navigate.
Fortunately, each year, Social Security recipients can count on changes to the program that work in their favor. Unfortunately, there are sometimes a few offsetting negatives that can cost participants some of their benefits. Below are four facts about how Social Security is changing in 2024 and what it could mean for you and your family.
1. Social Security benefits are getting a 3.2% cost-of-living adjustment in 2024
One of the most important things about Social Security is that its benefits are adjusted each year to keep up with inflation. The annual cost-of-living adjustment, or COLA for short, reflects changes in prices as measured by the Consumer Price Index. The average reading of the particular gauge of inflation that the Social Security Administration uses for the months of July, August, and September was 3.2% higher than in the corresponding period in 2022.
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The typical retired worker can expect to see a $59 monthly increase in their gross benefits, before accounting for the Medicare premiums that many Social Security recipients have deducted automatically from their checks. The typical older couple will get $94 more per month, while the average surviving spouse will see a $55 hike.
2. Some retirees will reach full retirement age later in 2024
Most people can claim Social Security as early as 62. However, taking benefits before your full retirement age (FRA) leads to a reduction in the amount you get each month.
For those born in 1957, full retirement age is 66 and six months. As a result, if you were born between July 1957 and December 1957, you'll reach FRA in the first half of 2024.
However, those born in 1958 have a higher full retirement age of 66 and eight months. Therefore, those born between January 1958 and April 1958 will have to wait longer to reach their FRA -- until between September 2024 and December 2024. Those born in May 1958 or later will have to wait until after the end of 2024 if they want full benefits.
3. Social Security's maximum benefit for high-income earners is higher
Those who retire in 2024 and qualify for the maximum benefit will receive more in their monthly Social Security than their peers who retired in 2023. Those claiming at age 62 in 2024 have a maximum benefit of $2,710, up $56 from 2023's maximum.
Some gains will be a lot bigger, though. The maximum Social Security benefit for those retiring at age 70 in 2024 will jump $318 to $4,873. That figure is up by nearly $1,000 in just the past three years, showing just how extreme inflation has been during that span of time.
4. Top earners will pay higher Social Security payroll taxes
Social Security gets most of its revenue from payroll taxes, and each year, the maximum wage base on which Social Security payroll taxes get charged generally goes up. In 2024, taxes will be charged on up to $168,600 of wage income. That's $8,400 higher than in 2023, which means that high-earning employees could see their withholding rise by $520.80, for a total of $10,453.20.
The news is even worse for self-employed workers. They end up paying not just the 6.2% payroll tax for employees, but also the matching 6.2% tax on employers. Payroll taxes could rise as much as $1,041.60, maxing out at $20,906.40. Yet for those earning less than 2023's wage base of $160,200, there won't be any difference at all in withholding unless your earned income rises.
Be ready for 2024
If you want to make the most of your Social Security benefits, knowing what's coming is important. Be sure to keep track of your Social Security -- not just at the beginning of 2024 but throughout your retirement -- in order to ensure that you're getting the financial support that the program is intended to provide to you.
