Social Security has been around for a long time. The program tends to undergo yearly changes that are important to stay informed about. With that in mind, here are three things to know about Social Security in 2024.
1. The typical senior gets less than $2,000 per month
If your retirement plan involves falling back on Social Security alone, here's some important information. As of March 2024, the average monthly retirement benefit paid by Social Security was just $1,913.31. That's a bit less than $23,000 a year.
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If the idea of having to pay all your bills from an income that small sounds impossible, then consider this your wake-up call to start building retirement savings. It's not easy to carve out money for an IRA or 401(k) plan, but if you have to retire on only Social Security, you might end up needing to scale back your lifestyle to an extreme degree. That could lead to a retirement you really aren't happy with.
2. Earnings beyond $168,600 aren't taxed for Social Security
Social Security's primary revenue source is payroll-tax collections. When you work, you pay into Social Security to help fund the program. But if you earn a lot of money, you may not be paying Social Security taxes on all of your wages.
Each year, there's a wage cap put in place to determine how much income is taxed for Social Security purposes. This year, that cap is $168,600. So if you earn a $200,000 salary, you're not paying Social Security taxes on $31,400 of income.
But don't get too comfortable with that $168,600 wage cap. Chances are, it'll rise next year since it tends to increase from one year to the next. But also, some lawmakers are fighting to raise the wage cap significantly or even lift it altogether to pump more much-needed money into the program.
3. Social Security may be a bit further away from benefit cuts than initially expected
The amount of payroll-tax revenue that Social Security can collect could shrink in the coming years, as older workers retire in droves. Social Security can fall back on its trust funds to keep up with scheduled benefits until those cash reserves are depleted. Once that happens, though, broad benefit cuts may be inevitable.
Recently, the Social Security Trustees released their annual report about the state of the program's finances. It said that, based on recent numbers, it's looking like Social Security's trust funds will be out of money come 2035.
That's not great news, but it's worth noting that previous estimates had Social Security's trust funds running dry in 2034. This update pushes out potential benefit cuts for another year, which is positive news in its own right.
It's important to prepare for potential Social Security cuts in case that timeline gets moved up or just in general. If you're still working, save more -- it's really your best bet. If you're already retired, it may not be too late to build savings if you're willing to join the gig economy and work in some capacity.
Whether you're retired or not, it's important to know what's happening with Social Security at all times. You never know when a big change to the program has the potential to impact you -- either in the near term or in the future.
