If you’re retired, or are planning to retire in the near future, Social Security is likely to be delivering a significant chunk of your retirement income. The program boasts nearly 50 million retired beneficiaries and also provides support to millions of disabled workers, and dependents of retirees and deceased retirees.
It’s important, then, to keep up with Social Security changes and challenges over the years. Here’s a look at some things to know about Social Security, as of 2024.
1. Know what you can expect from Social Security
First, if you’re not yet collecting your Social Security benefits, know what you can expect from Social Security, as that can help in your retirement planning. Know, for example, that as of November, the average monthly retirement benefit was $1,845, or about $22,000 for the year. That’s a helpful sum but not enough for most folks to live on. And yes, many are receiving more than that but not that much more. The rather unattainable maximum benefit was $4,873 per month, or about $58,500 annually.
You can get a much clearer estimate of how much you can expect to collect from Social Security by setting up a “my Social Security” account at the Social Security website. After you do that, you’ll be able to access the Social Security Administration’s (SSA’s) record of your earnings by year, which can allow you to spot any errors and then have them fixed. You’ll also be able to see estimates of how much you may collect in the future, depending on various factors, such as when you start collecting.
2. Benefits are increasing by 3.2% in 2024
You may know that Social Security benefits are increased in most years via cost-of-living adjustments — or COLAs. For 2024, benefits are going up by 3.2%. That may seem kind of small, given recent inflation levels, but inflation does seem to be more under control lately, and a 3.2% hike is actually above average. Recent increases have been much bigger, too — 8.7% in 2023 and 5.9% in 2022. But other than those, there hasn’t been an increase greater than 3% since 2011.
There are reasonable arguments to be made that Social Security COLAs are lower than they should be, but at least they do get regular increases. That can help protect retirees from the effects of inflation, which can really shrink the purchasing power of retiree incomes. (You’ll likely need more income than you think in retirement, so it’s smart to start saving and investing as soon as possible.)
3. Some numbers have changed for 2024
Next, know that many key Social Security numbers get updated regularly — not just COLAs. For example, there’s a maximum earnings limit that reflects the maximum amount of your earnings that will get taxed for Social Security. For 2023, that limit was $160,200, up considerably from 2022’s $147,000. For 2024, that earnings cap is rising to $168,600. So if you’re a high earner, more of your income will get taxed for Social Security. And if you’re a very high earner, only a portion of your income will get taxed, while those earning $168,600 or less will see every dollar of earnings taxed.
A minor change is that the “credits” that we earn to qualify for Social Security are also increasing — to earn one credit, the amount of earnings needed will rise from $1,640 to $1,730. To be eligible for benefits, we need to earn a total of 40 credits, and we can earn up to four per year. So for most workers, it will be fairly easy to qualify over a decade of working because four credits at the new level amounts to only $6,920 in earnings.
4. Social Security won’t run dry in 2024 — or ever
Finally, despite what you might think from various scary headlines here and there, Social Security, while definitely facing some ominous challenges, is not going away in 2024 — or ever, most likely. Here’s the problem: Since the program began, workers have been paying into the system, and beneficiaries have been collecting from it. With many more workers than beneficiaries, the program has long run a surplus. But workers are living longer and often retiring earlier these days, so the surplus is shrinking.
The Social Security trustees’ 2023 report on the health of the program notes that
The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100% of total scheduled benefits until 2033, one year earlier than reported last year. At that time, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 77% of scheduled benefits.
So come 2034, you might only receive 77% of the benefits due to you. As long as workers are paying their taxes into the system, though, there will always be some money for benefits.
Remember, though, that Congress can fix this problem and strengthen Social Security in various ways, and they may well do so. It can’t hurt if they hear from you, either, if you’d like to urge them to take action. Don’t leave your retirement income up to chance — or political whim.
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What All Retirees Need to Know About Social Security in 2024 was originally published by The Motley Fool