Social Security tends to undergo changes every year, and those can be a mixed bag. But first, the positive. In 2024, Social Security recipients are going to see their benefits rise by 3.2%. And while that's not as large an increase as the whopping 8.7% cost-of-living adjustment (COLA) that arrived in 2023, it's still a nice boost.
Plus, a smaller Social Security COLA is an indication that inflation is cooling. And that alone is good news for seniors.
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Another positive Social Security change in the works is that come 2024, older Americans who collect income from a job on top of monthly benefits can earn more before having their Social Security impacted. To be clear, Social Security benefits are not affected by earnings once recipients reach full retirement age. But prior to that, workers need to be mindful of the earnings-test limit. In 2024, that limit will be higher than in 2023, giving older earners more leeway.
But unfortunately, there are also two not-so-great Social Security changes coming down the pike in 2024. And they're changes that have the potential to impact higher and lower earners.
1. A higher wage cap
Social Security is primarily funded by payroll taxes. But workers don't automatically pay Social Security taxes on all of their wages.
Each year, there's a cap that's set that dictates how much income will be taxable for Social Security purposes. In 2023, that cap was $160,200. In 2024, however, it's rising to $168,600. So all told, higher earners are looking at being taxed on an additional $8,400 of wages.
Now, the good news is that salaried workers will split that added tax burden evenly with their employers. But those who are self-employed will be looking at a much higher Social Security tax bill in 2024, since they don't have employers to help share the burden.
2. A higher income requirement for work credits
To be able to collect Social Security benefits in retirement, workers must accrue 40 credits in their lifetime at a maximum of four credits per year. And the value of a work credit can change from one year to the next.
Right now, $1,640 in earnings results in one work credit. In 2024, it will take $1,730 in earned wages to get a single work credit.
This change could impact low-income earners who are only able to work on a part-time basis. Thankfully, full-time workers should still have no problem accruing their four work credits in 2024. Even at a minimum wage of $7.25 an hour, anyone who works 40 hours a week, 50 weeks a year will be well beyond the earnings threshold needed for four Social Security credits in the new year.
Pay attention either way
You may not think to pay attention to Social Security changes if you're someone who's nowhere close to being old enough to collect benefits. But actually, these two changes are very much geared toward workers who may be decades away from retirement. So always keep tabs on updates to Social Security, even though you may be inclined to assume that they won't apply to you.
