3 Social Security Changes in 2024: Naturally, a sizable portion of the American population continues to receive no Social Security benefits. They still care about the outcome of the federal program, though. Here are three 2024 Social Security adjustments that will have an impact on millions of Americans who haven’t yet reached retirement age.
Changes to Social Security influence more than simply existing beneficiaries.
There are about 50 million retired workers who receive Social Security benefits. That corresponds to about one in seven Americans. The amount increases significantly when retirees’ spouses and children, workers’ surviving spouses, and recipients of disability benefits are included.
Naturally, a sizable portion of the American population continues to receive no Social Security benefits. They still care about the outcome of the federal program, though. Here are three 2024 Social Security adjustments that will have an impact on millions of Americans who haven’t yet reached retirement age.
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1. The cost-of-living modification
The Social Security Administration (SSA) declared in October that the 2024 cost-of-living adjustment (COLA) will be 3.2% annually. This was nevertheless higher than the average adjustment in prior years, even if it was far less than the 8.7% increase in 2023.
This COLA will start to apply to anyone receiving Social Security benefits in January. The increase, however, also has an impact on all Americans who do not currently receive benefits but will in the future.
In theory, the SSA does not immediately adjust the Social Security payment amount for the COLA. The main insurance amount (PIA) is used in the benefit computation. The COLA raises this PIA, which consequently raises the Social Security benefit. The good news is that PIAs for those not receiving Social Security retirement payments also rise with each COLA.
2. An increased payroll taxable ceiling
The increased payroll taxable maximum is another Social Security adjustment scheduled for 2024 that will impact a large number of Americans who have not yet retired. This maximum was $160,200 in 2023. The amount will rise to $168,600 in the upcoming year.
Up to this taxable threshold, employees are required to pay a 6.2% Social Security payroll tax on all wages. They pay an additional 6.2% tax to their employers. Self-employed people are required to pay 12.4% since they are both employers and employees. There is no payroll tax applied to earnings over the taxable maximum, which helps pay for Social Security.
It’s difficult to predict just how many Americans will be impacted by this shift in 2024. 11.9% of American households made $200,000 or more in 2022. 9.2% more households had incomes ranging from $150,000 to $199,999. We are unsure of the exact number of people who would be required to pay additional Social Security payroll taxes in 2024, though, as some of these households have two incomes.
In 2022, the median household income in the United States was $74,580. The increased payroll taxable maximum won’t have a significant impact on the majority of Americans, though it might for some.
3. An increased salary cap
With this one, I’m going to cheat a little bit. In 2024, Social Security will raise the earnings cap for individuals who continue to work while receiving retirement benefits before reaching their full retirement age (FRA). Despite receiving Social Security benefits, some individuals are not yet completely retired.
For every $2 over the annual cap earned, the SSA will deduct $1 from benefits. The cap was set at $21,240 in 2023. In 2024, it will rise to $22,320.
Throughout the year that a person achieves their FRA, the rules alter. For every $3 beyond a higher yearly cap, the SSA will deduct $1 in benefits. This upper limit was set at $56,520 in 2023. In 2024, it will be $59,520.
Unfortunately, the SSA does not keep track of how many people are in this group. Nevertheless, the government has found that around 40% of Americans begin receiving retirement benefits at the earliest age of 62, with a sizable portion beginning benefits later but before their FRA. According to a 2022 Employee Benefit Research Institute survey, 27% of retirees had worked when they were retired for compensation. These figures imply that the higher earnings cap may have an impact on a sizable number of people, but they are insufficient to draw firm conclusions.
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Social Security’s 2024 Earnings Cap Increase
• Social Security will increase the earnings cap for individuals working while receiving retirement benefits before reaching full retirement age (FRA).
• For every $2 over the annual cap earned, the SSA deducts $1 from benefits.
• The upper limit for benefits deducted from earnings will increase from $56,520 in 2023 to $59,520 in 2024.
• The SSA does not track the number of this group, but around 40% of Americans start receiving retirement benefits at 62.
• A 2022 survey showed 27% of retirees worked when they were retired for compensation, suggesting the higher earnings cap may impact a significant number.
