You'd think a program that's been around as long as Social Security wouldn't look so different from one year to the next. But you may be surprised at how many changes to the program arrive on a yearly basis.
In 2024, Social Security is changing in a few positive ways, but there's a less-than-favorable change to be aware of, as well. Here's what to expect.
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1. Benefits are getting a 3.2% boost
In 2023, seniors on Social Security saw their benefits rise 8.7%, thanks to surging inflation. Over the past year, inflation has thankfully cooled. As a result, Social Security recipients are getting a smaller cost-of-living adjustment (COLA) in 2024.
However, that's not a bad thing. First, a 3.2% raise is actually fairly generous for recent Social Security COLAs, not counting the previous two. Also, it's a sign that seniors (and workers alike) may finally be in for some relief from higher living costs.
The one hiccup seniors on Social Security will face in 2024 with regard to their COLAs is a rise in the cost of Medicare Part B. In the new year, the standard monthly Part B premium is increasing from $164.90 to $174.70.
Seniors who are enrolled in Social Security and Medicare at the same time have their Part B premiums automatically deducted from their monthly benefits. So that $9.80 increase is going to reduce some seniors' COLAs.
Last year, not only did Social Security get its largest COLA in decades, but the cost of Medicare Part B also didn't go up. Rather, it went down. So all told, in 2024, Social Security recipients won't benefit as much from their COLAs -- but it's still a reasonably generous raise.
2. The earnings-test limit is rising
Seniors who continue to earn money from a job are allowed to collect Social Security at the same time. And once you reach full retirement age (FRA), you can earn any amount of money without having to worry about your income impacting your benefits. However, if you decide to work and collect benefits simultaneously ahead of FRA, you'll need to be mindful of the earnings-test limit.
That limit is rising in 2024. And that means you have even more opportunity to earn money without having any benefits withheld.
This year, the earnings-test limit is $21,240, or $56,520 for those reaching FRA. Next year, it's rising to $22,320, or $59,520 for those reaching FRA.
3. The wage cap for Social Security taxes is increasing
Social Security relies on payroll tax revenue to stay afloat. And workers don't necessarily pay Social Security taxes on all of their income. Rather, there's a wage cap that determines how much income is taxable for that purpose.
This year, the wage cap is $160,200. Next year, however, it's rising to $168,600.
All told, anyone earning $168,600 or more will have to pay Social Security tax on an additional $8,400 of earnings. And that's not exactly a positive change. However, if we want to spin it positively, the more money that goes into Social Security, the more likely the program is to remain viable.
Stay in the know
It's not a given that these Social Security changes are going to have an impact on you. If you're collecting benefits, that 3.2% COLA will apply to your monthly payments. But you may not have to worry about the earnings-test limit if you're not working or have already reached FRA.
Similarly, it may be that you're working and earning $80,000 a year. In that case, none of the above changes will have a direct impact on you.
Even so, it's a good idea to stay informed about Social Security changes because you never know when a given one might affect you in some way. So not only should you keep these three 2024 changes on your radar, but also, check in on Social Security around the same time next year to see what's in store for 2025.
