2024 Social Security Changes You Must Know!

The cost-of-living adjustment (COLA) may grab the headlines, but several elements of Social Security change annually to align with national trends in prices and wages, impacting the benefits received by millions of Americans and the taxes paid by nearly all U.S. workers. Here are five significant alterations to Social Security in 2024:

#1 Enhanced COLA Benefits

The inflation rate moderated significantly in 2024, but consumer prices increased, resulting in a 3.2 percent COLA for Social Security beneficiaries. According to the Social Security Administration (SSA), starting in January, this will boost the estimated average retirement benefit by $59 per month, raising it from $1,848 to $1,907.

While this 2024 COLA increase is lower than the 8.7 percent adjustment in 2024, which was driven by high inflation in 2024, it remains slightly higher than the historical average since the early ’90s, around 2.5 percent per year. For individuals claiming Social Security at full retirement age (FRA) in 2024, the maximum benefit will be $3,822 monthly, up from $3,627 in 2024.

It’s important to note that the COLA impacts retirees and increases monthly payments for various Social Security programs and Supplemental Security Income (SSI), a benefit administered by the SSA for low-income individuals aged 65 and older or those unable to work due to disability.

#2 Medicare Premium Adjustment

If you’re enrolled in Medicare, you likely have Part B premiums, covering doctor visits and outpatient treatment, deducted directly from your Social Security payments. Consequently, an increase in Medicare premiums can offset your cost-of-living adjustment. In 2024, the standard monthly Part B rate rises from $164.90 to $174.70, reducing the COLA gain by approximately $10 per month.

#3 Social Security Taxes

Social Security benefits are predominantly funded by a 12.4 percent tax on most workers’ incomes, with employees paying half (via FICA withholding from their paychecks) and employers covering the rest. This tax rate has remained constant since 1990, but the income threshold subject to it changes annually in line with national wage trends. In 2024, this threshold increases to $168,600, up from $160,200 in 2024. Earnings beyond this level are not subject to Social Security taxation or income from investments.

#4 Social Security Earnings Test

If you continue to work while collecting Social Security, a portion of your monthly payment may be temporarily withheld. This earnings test applies to those receiving retirement, survivor, or family benefits who have not yet reached full retirement age and have earnings above a specified level. In 2024, beneficiaries who will not reach FRA until later have $1 withheld from their Social Security payment for every $2 in work income exceeding $22,320 (up from $21,240 in 2024). For those reaching FRA in 2024, Social Security will withhold $1 for every $3 in earnings over $59,520 (up from $56,520 in 2024) until they reach the milestone. Afterward, the earnings test expires, and the SSA adjusts benefits upward to compensate for prior withholdings.

Those receiving SSDI benefits may lose benefits if they engage in “substantial gainful activity.” In 2024, the threshold for most SSDI beneficiaries is $1,550 per month, up from $1,470 in 2024, while those receiving SSDI based on blindness have a higher income limit of $2,590 per month, up from $2,460 in 2024.

#5 Qualifying for Benefits

Those seeking retirement benefits must accumulate Social Security credits earned through “covered” work, which involves paying Social Security taxes on income. In 2024, you earn one credit for $1,730 in earnings, a $90 increase from the 2024 level. A total of four credits is possible each year, equivalent to $6,920 in work income in 2024. It is not necessary to have 40 consecutive credits to qualify for retirement benefits.

Qualifying for SSDI also requires accumulating credits, with the number required varying from six (for a year and a half of work) to 40, depending on your age when a medical condition prevents you from working.