The Social Security program undergoes certain changes each year to keep benefits aligned with inflation and wages. Another round of annual revisions took effect in January 2024. Most of those changes could impact benefit payments for retired workers and other current beneficiaries. But one change impacts Social Security payroll taxes for current workers, and another impacts the program's eligibility criteria.
Read on to learn about five big Social Security changes that took effect this year.
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1. Workers must earn a bit more money to qualify for Social Security
Workers must earn 40 credits (also called quarters of coverage) to be fully insured under the Social Security program. Anyone who lacks 40 credits cannot receive retirement benefits, nor can their families receive spousal benefits or survivors benefits.
Workers can earn up to four credits per year by paying Social Security taxes, but the amount of income required to earn a credit changes each year to keep pace with general wage levels. The earnings amount required to earn one credit is $1,730 in 2024, up from $1,640 in 2023.
2. Social Security benefits got a cost-of-living adjustment
Social Security payments get an annual cost-of-living adjustment (COLA) to help retired workers and other recipients keep up with inflation. Without those yearly raises, benefits would quickly lose buying power as prices drifted upward across the economy. For instance, a basket of goods and services priced at $100 in January 2004 would cost about $166 today, according to the Labor Department.
Social Security benefits got a 3.2% COLA in 2024. The chart below illustrates how the COLA will impact the average benefit for retired workers, spouses, survivors, and disabled workers.
|
Beneficiary Group |
Average Benefit Before COLA |
Average Benefit After COLA |
Increase |
|---|---|---|---|
|
Retired worker |
$1,847 |
$1,906 |
$59 |
|
Spouse of retired workers |
$885 |
$913 |
$28 |
|
Aged Widow(er) |
$1,720 |
$1,775 |
$55 |
|
Disabled worker |
$1,489 |
$1,537 |
$48 |
Data source: Social Security Administration.
3. Some high-income workers will pay more taxes to Social Security
Social Security is mostly financed through a payroll tax, but the amount of income subject to taxation is limited under current law. The taxable earnings limit, also called the taxable maximum, is adjusted annually to account for changes in general wage levels.
The taxable maximum is $168,600 in 2024, up from $160,200 in 2023. That means some workers will pay Social Security taxes on an additional $8,400 this year. The tax rate for most workers is 6.2%, meaning they could owe an additional $520.80. But self-employed workers are taxed at 12.4%, meaning they could owe an additional $1,041.60.
4. The maximum Social Security retired-worker benefit got bigger
The Social Security benefits formula is modified annually to keep benefits aligned with general wage levels. For that reason, the maximum payout for newly awarded retired workers tends to increase each year. The maximum Social Security benefit at full retirement age (FRA) is $3,822 per month in 2024, up from $3,627 per month in 2023.
However, workers may choose to claim Social Security before or after FRA. The chart below shows the maximum retired worker benefit at different claiming ages in 2024.
|
Claiming Age |
Maximum Retired Worker Benefit in 2024 |
|---|---|
|
62 |
$2,710 |
|
65 |
$3,426 |
|
66 |
$3,652 |
|
FRA |
$3,822 |
|
67 |
$3,911 |
|
70 |
$4,873 |
Data source: Social Security Administration.
5. Early filers can earn more money before Social Security benefits are withheld
Workers who start Social Security before FRA and continue working will have part of their benefit temporarily withheld if their income exceeds certain limits. Those limits are referred to as the retirement earnings test (RET) exempt amounts, and they tend to increase each year based on changes in general wage levels.
The updated RET exempt amounts for 2024 are detailed below:
- The first limit is $22,320: This lower figure applies to workers who will be under FRA for the entire year, such that $1 in Social Security benefits is withheld for every $2 in earnings that exceed $22,320.
- The second limit is $59,520: This higher figure applies to workers who will reach FRA during the year, such that $1 in Social Security benefits is withheld for every $3 in earnings that exceed $59,520.
The earnings test no longer applies once a person reaches FRA, meaning retired workers can earn as much income as they want without any impact on their Social Security benefit. Additionally, any benefits withheld prior to FRA are gradually repaid once the retired worker reaches FRA, such that they recoup most or all withholdings over a typical lifespan.
