Retiring this year, or already retired? There are some key things that you need to know about Social Security to understand what these benefits can and can't do to ensure your financial safety.
Here's what every retiree should know about Social Security in 2024.
Image source: Getty Images.
1. The average monthly benefit is $1,907
Retirees who receive the average monthly Social Security check get a payment of $1,907 in 2024. This amounts to annual retirement income of $22,884, which isn't enough for most people to live on.
Whether your benefits are more or less than the average, Social Security is designed to only replace about 40% of your income -- not to be your sole source of support. If you're relying too much on them, you might not have enough to afford the necessities.
You'll want a budget plan to cover your costs with the combined funds from Social Security and savings withdrawals, without taking too much out of your investment accounts and running them dry. If you're struggling to make the numbers work, you might need to make drastic changes, like moving to an area with a lower cost of living.
And if you plan to retire this year, be sure you understand what your benefit will look like and confirm that it's going to be enough when combined with savings -- before giving notice.
2. Benefits might be affected if your earned income exceeds the limits
If you are under full retirement age and receiving Social Security benefits, there are rules for how much you can earn through work in 2024 before your monthly benefit is diminished.
This year, you're allowed to earn $22,320 from work if you won't reach full retirement age (FRA) all year. Once you've made that much, benefits are temporarily reduced by $1 for each $2 extra you bring home. If you'll reach FRA at some point in the year but haven't yet, you'll lose $1 for each $3 earned above $59,520.
If you're working part-time as a retiree, understanding these rules can ensure you aren't planning your budget around earned income with Social Security checks, only to find out you might not be able to double dip as much as you thought.
If you have already reached your full retirement age, though, you can work as much as you want without worrying about any of these limits.
Also, keep in mind that if you have benefits reduced due to working, you could get them back in the future. When you reach FRA, monthly benefits get an upward adjustment to account for withheld payouts under this rule.
3. You could owe taxes on Social Security benefits
Lastly, be aware that some retirees will owe taxes on benefits. There are currently 10 states that tax Social Security for at least some recipients. The federal government also partly taxes benefits once provisional income hits $25,000 for single filers and $32,000 for married joint filers. Provisional income is half of Social Security benefits plus all taxable income and some non-taxable income like municipal bond interest.
If your provisional income is above the $25,000 or $32,000 threshold, you could be taxed on up to 50% of your benefits. If your income goes above $34,000 for single filers or $44,000 for married joint filers, you could be taxed on up to 85% of benefits.
Since current retirees received a Social Security raise this year, some people could be pushed into having taxable benefits when they didn't before. Future retirees also need to know if they'll have to give the government a cut of their checks.
Every retiree should be aware of these three crucial facts about their benefits in 2024. Now that you know them, you can make informed choices about how you work, spend, and budget your money all year long.
