When it comes to Social Security, the one constant is that something will change annually. Many significant changes to Social Security have taken effect as 2024 has begun.
Even though these changes may not have been observed by many Americans or retirees, they could nonetheless have an impact on their financial security. Besides the biggest change announced last month regarding the 3.2% increase in the cost of living (COLA), there will be several other changes to the Social Security system.
The most important changes in Social Security for 2024
Maximum Social Security benefits will increase
According to CPA Practice Advisor, the maximum Social Security payment for an employee who reaches full retirement age will rise from $3,627 in 2023 to $3,822 in 2024. This only affects people who file claims at their full retirement age (FRA), which is currently 66 or 67, depending on their birth year. Keep in mind that Social Security candidates who apply early will receive less per month.
Maximum taxable earnings rose to $168,600
In 2023, employees’ income up to $160,200 was subject to the 6.2% Social Security tax (with their employer matching that amount). Any earnings above that amount were not taxed. In 2024, the maximum taxable earnings will rise to $168,600, but the Social Security tax rate remains unchanged at 6.2% (12.4% for the self-employed).
The new full retirement age (FRA)
The full retirement age (FRA) has changed, which is among the earliest and most significant changes. For anyone who turned 66 before 2024, the full retirement age ranged from 65 to 66 and six months. However, if you turn 66 in 2024, your FRA will be 66 and 8 months. And if you do not reach this age until 2026, your full retirement age will be 67 (the latest FRA you can have, regardless of when you were born).
Anyone who is planning to claim benefits will have to wait a bit longer to receive their entire monthly payment as the full retirement age has changed. Future retirees need to understand this so they can plan to work longer hours or accept a smaller retirement payout.
Increased earning limits
Another change affects current retirees who want to work while receiving Social Security benefits. For those in this situation who have not yet reached full retirement age, there are limits on how much they can earn without having their benefits reduced.
If you do not meet FRA for the entire year, you can earn up to $22,320 in 2024 without losing benefits. Following that, your Social Security income will decrease by $1 for every $2 earned. If you reach FRA in 2024, you can earn up to $59,520 before your benefits are reduced by $1 for every $3 above that amount.
Losing benefits can still be difficult if you are dependent on them. Even though the reduction is only temporary, payments will be adjusted to account for lost income at full retirement age. To avoid having half or all of their Social Security checks suddenly disappear, people trying to receive both a paycheck and Social Security benefits can earn more this year.
Spousal and disability benefits will be bigger
According to the SSA, average payments for widowed women with two children will rise from $3,540 in 2023 to $3,653 in 2024. The average monthly compensation for elderly widows and widowers living alone will increase from $1,718 to $1,773. The average monthly payment for a disabled worker who has a spouse and one or more children will rise from $2,636 to $2,720.
Higher SSI payment standards
The SSI Federal Payment Standard, which is paid to people who receive Social Security benefits in addition to Supplemental Security Income (SSI), will increase from $914 in 2023 to $943 in 2024. The standard monthly payment for couples will rise from $1,371 to $1,415.