Major Changes to Social Security Benefits in 2024 – What Retirees Need to Know

The latest Social Security Trustees Report has sparked a renewed sense of urgency about the future of Social Security. According to the report, the program might not exist in its current form by 2035, urging Americans to act now. While Congress is working on measures to address the funding issues, it’s clear that we need to prepare for a different retirement landscape.

Social Security undergoes changes every year, and while they might seem minor individually, they add up significantly over time. Let’s cut into the most significant changes to Social Security benefits in 2024 and what they mean for retirees.

Increased Benefit

One of the most significant changes in 2024 is the increase in the maximum Social Security benefit. As the cost of living continues to rise, so do the benefits, to keep pace. For 2024, the Cost of Living Adjustment (COLA) was set at 3.2%. This adjustment has raised the maximum benefit from $4,555 per month in 2023 to $4,873 in 2024.

This increase primarily benefits those eligible for the maximum payout and who have delayed their benefits until age 70. Other retirees will see a proportional increase based on their contributions and the age they started claiming benefits. This trend is expected to continue as future retirees will have higher average earnings, leading to higher benefits.

Higher Earnings Limits

For those who choose to retire early, 2024 brings a significant update. Retirees who start collecting benefits at age 62 can now earn more without reducing their monthly Social Security payments.

The retirement earnings test thresholds for 2024 are $22,320 and $59,520, up from $21,240 and $56,520 in 2023. Under this test, the Social Security Administration (SSA) withholds $1 for every $2 earned above the threshold. If you reach full retirement age within the year, the threshold is higher, and the SSA withholds $1 for every $3 earned above it. Once you reach full retirement age, the earnings test no longer applies, and you can keep all your earnings plus your Social Security benefits.

Higher Payroll Tax Cap

Another important change for 2024 is the increase in the payroll tax cap. The cap has been raised from $160,200 in 2023 to $168,600. This adjustment means that a higher portion of high earners’ incomes will be subject to Social Security taxes.

While this change affects only about 6% of workers, according to the SSA, it significantly boosts the program’s funding. As Social Security retirement benefits are largely funded by payroll taxes, raising the cap helps ensure more money flows into the system.

The changes to Social Security in 2024 are crucial for retirees. With higher maximum benefits, increased earnings limits for early retirees, and a higher payroll tax cap, the program is adapting to meet the needs of current and future retirees. Knowing these changes can help you better prepare for retirement and make informed decisions about your Social Security benefits.

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