Major Changes to Social Security in 2024 – How These Updates Will Impact You

Social Security often feels like a distant concern—until retirement starts looming. If you’re approaching retirement or already receiving benefits, it’s vital to stay informed about changes that could impact your financial future. Did you know that 42% of women and 37% of men rely on Social Security for at least half their income? That’s a big deal! This year, there are several important updates to the Social Security program that you should know about, especially with regard to retirement, survivor, and disability insurance (RSDI), and Supplemental Security Income (SSI). Let’s break down five key developments for 2024.

COLA

One of the most anticipated Social Security changes is the annual cost-of-living adjustment (COLA). This adjustment helps benefits keep pace with inflation, which is especially important when the cost of everything from groceries to healthcare is rising.

Historical COLA Increases:

Year	COLA Increase
2015	1.70%
2016	0%
2017	0.30%
2018	2%
2019	2.80%
2020	1.60%
2021	1.30%
2022	5.90%
2023	8.70%
2024	3.20%

Although the 2024 COLA is set at 3.2%, any increase adds up over time. For instance, a $60 bump each month translates to an additional $720 per year. While the actual percentage for 2025 will be announced in October, it’s a good idea to plan ahead. Remember, the longer you wait to claim Social Security—up to age 70—the more you’ll benefit from these adjustments.

Earnings

The earnings limit is another key number that changes each year. If you’re receiving Social Security and still working before reaching full retirement age (67 for most people), the earnings test limit is crucial. Here’s how it works:

• If you don’t reach full retirement age this year, Social Security will reduce your payments by $1 for every $2 earned above $22,320.
• If you hit full retirement age, the threshold is $59,520, and the reduction is $1 for every $3 over the limit.

The good news? Social Security will adjust your future benefits to account for any withholdings, so it’s not a total loss. This higher limit helps retirees continue working without sacrificing too much of their Social Security income.

Wage

Most people aren’t aware that not all income is subject to Social Security taxes. For 2024, the wage cap sits at $168,600, meaning earnings beyond that aren’t taxed for Social Security. This cap is expected to rise again in 2025. While it seems unfair to some—people earning $168,600 and $33 million pay the same amount in Social Security tax—it’s part of how the system is currently structured. Proposals to remove or raise the cap to support Social Security’s longevity are under discussion, so stay tuned for future updates.

Maximum

Although it’s tough to qualify for the maximum Social Security benefit, some people manage to do so. For those who hit all the right conditions, the maximum annual benefit in 2024 is $45,864, or $3,822 per month. While these figures will increase slightly next year, the only surefire way to boost your benefits is to delay claiming them until age 70. It’s challenging but worth considering if you want the highest possible payout.

State

Currently, 41 states and Washington D.C. do not tax Social Security benefits. Several others, like Kansas and Missouri, have recently joined the list. It’s possible that 42 or 43 states will follow suit in the coming years. If you live in a state that still taxes Social Security income, it’s worth keeping an eye on these changes. Every bit helps when you’re on a fixed income!

As you can see, staying informed about these changes is key to maximizing your Social Security benefits. While Social Security alone may not cover all your financial needs in retirement, knowing these updates can help you plan for a more comfortable future.

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