More than 50 million retired workers receive Social Security benefits. That's nearly one in every seven Americans. Adding spouses and children of retirees, survivors of deceased workers, and people receiving disability benefits boosts the total quite a bit.
Of course, there are still many people in the U.S. who don't receive Social Security. However, what happens with the federal program still matters to them. Here are three Social Security changes in 2024 that will affect millions of Americans who aren't retired yet.
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1. Cost-of-living adjustment
In October, the Social Security Administration (SSA) announced an annual cost-of-living adjustment (COLA) of 3.2% for 2024. While this was well below the 8.7% increase in 2023, it's still above the average adjustment in recent years.
Anyone receiving Social Security benefits will see this COLA kick in beginning in January. However, the increase also affects all Americans who aren't receiving benefits yet but one day will.
Technically, the SSA doesn't apply the COLA directly to the Social Security benefit amount. The benefit calculation uses a primary insurance amount (PIA). The COLA increases this PIA, which in turn causes the Social Security benefit to increase as well. The good news for people who aren't receiving Social Security retirement benefits is that their PIAs increase with each COLA, too.
2. Higher payroll taxable maximum
Another Social Security change in 2024 that will affect many Americans who aren't retired yet is the higher payroll taxable maximum. In 2023, this maximum was $160,200. It will increase to $168,600 in the new year.
Employees must pay a Social Security payroll tax of 6.2% on all earnings up to this taxable maximum. Their employers pay an additional 6.2% tax. Since self-employed individuals are both employee and employer, they have to pay 12.4%. Any earnings above the taxable maximum aren't subject to the payroll tax that helps fund Social Security.
It's hard to say exactly how many Americans this change will affect in 2024. In 2022, 11.9% of U.S. households earned $200,000 or more. Another 9.2% of households earned between $150,000 and $199,999. However, some of these are dual-income households, so we don't know for sure how many people would potentially have to pay more Social Security payroll taxes in 2024.
The median U.S. household income in 2022 was $74,580. While some individuals will be affected by the higher payroll taxable maximum, it's fair to say that most Americans won't be.
3. Higher earnings limit
I'm going to cheat a little with this one. Social Security will implement a higher earnings limit in 2024 for people who claim retirement benefits before their full retirement age (FRA) but continue to work. Although these people receive Social Security benefits, they haven't fully retired.
The SSA will withhold $1 in benefits for every $2 earned above the annual limit. In 2023, the limit was $21,240. It increases to $22,320 in 2024.
The rules change during the year a person reaches their FRA. The SSA will withhold $1 in benefits for every $3 earned above a higher annual limit. In 2023, this higher limit was $56,520. It will be $59,520 in 2024.
Unfortunately, the SSA doesn't track data on how many people are in this group. However, the agency has revealed that nearly one in four Americans claim retirement benefits at the earliest age possible (62), with significant percentages claiming benefits later but before their FRA. A 2022 report from the Employee Benefit Research Institute found that 27% of all retirees have worked for pay in retirement. These figures aren't enough to conclusively estimate how many people could be affected by the higher earnings limit, but they hint at a potentially sizable number.
