These days, a lot of people are on top of economic news, with topics like inflation and interest rates monopolizing much of the media. As such, news pertaining to Social Security tends to get pushed to the background to a large degree.
But it's important to know about changes to the program, whether you're currently receiving benefits or are years away from filing your claim. Here are three important Social Security updates for 2024 you should be aware of.
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1. Benefits increased 3.2%, but next year's increase may be lower
Social Security benefits are eligible for an annual cost-of-living adjustment, or COLA. This doesn't mean benefits are guaranteed to rise every year. And we've had more than one $0 COLA in the past.
But all told, COLAs are designed to help seniors maintain buying power in the face of inflation. Since inflation was pretty high in 2023, Social Security benefits rose 3.2% at the start of 2024.
Meanwhile, elevated inflation seems to want to stick around. Because of that, it's highly unlikely that 2025 will be another $0 COLA year.
Current estimates put next year's Social Security COLA at 2.6%. That's not as high as 2024's COLA, but it's also a sign of cooling inflation, so there's that silver lining.
It's also worth noting that Social Security COLAs are calculated based on third-quarter inflation data. So while that 2.6% projection comes from a fairly reliable source -- the nonpartisan Senior Citizens League -- it also has the potential to change substantially depending on how inflation trends in the coming months.
2. Seniors can earn more money without risking withheld benefits
It's possible to collect Social Security while earning income from a job. Once you reach full retirement age (FRA), you can earn any amount of money without risking having some of your Social Security benefits withheld. But if you're working and receiving benefits prior to FRA, you'll be subject to earnings-test limits.
In 2024, the earnings-test limits are higher than in 2023. You can earn up to $22,320 without losing benefits, up from $21,240 in 2023. From that point onward, you'll have $1 withheld per $2 of job-related earnings.
Now, if you're reaching FRA this year but haven't gotten there yet and are working, you'll enjoy a much higher earnings-test limit. In 2024, you can earn up to $59,520 without losing benefits, up from $56,520 in 2023. If you exceed that limit, Social Security will withhold $1 per $3 of job-related earnings.
However, do know that withheld benefits aren't forfeited (hence the word "withheld"). Once you reach FRA, you'll get that money added back into your benefits.
3. Higher earners are paying more into the program
Social Security gets the bulk of its revenue from payroll taxes. But workers don't necessarily pay those taxes on their entire salary.
Each year, a wage cap is established that limits the extent to which earnings are taxed for Social Security. And this year, that cap is $168,600, up from $160,200 in 2023.
Of course, some might argue that it's silly to even have a wage cap, and that workers should pay Social Security tax on all of their income. Doing so might also help address the program's impending financial shortfall that has the potential to result in benefit cuts.
However, the wage cap serves Social Security as well. That's because there's a maximum monthly benefit the program will pay. So while earnings above the wage cap aren't taxed, they also don't count toward calculating future retirement benefits. That limits the extent to which Social Security has to pay higher earners down the line.
Stay in the know
Social Security doesn't make the news every day, but that doesn't mean changes to the program aren't brewing. It's in your best interest to keep tabs on the program, whether you're still working or have been collecting benefits for years. You might have to dig around to find updates, but it's important to have that information in case it ends up affecting you in some way.
