Approximately 50 million Americans receive at least a portion of their retirement income from Social Security, making it an essential component of the nation’s retirement infrastructure. Nevertheless, despite its significance to many presents and future retirees, the program is in jeopardy. Social Security’s trust funds are projected to run out of money by 2035, necessitating substantial benefit cutbacks, tax increases, or a combination of the two.
With this stark truth in mind, it is crucial to know what to expect from Social Security in 2024 — just a dozen years before the anticipated day of reckoning. What transpires next year and in the subsequent several years will determine if the 2035 forecast is excessively optimistic, extremely cautious, or about right.
The following are some of the expected changes to Social Security in 2024.
Benefits are rising significantly.
In 2024, existing recipients may anticipate an 8.7% rise in payouts due to the program’s yearly inflation adjustment. As of October 2024, the average monthly benefit for a retiree was $1,676.53. Beginning in January 2024, the average monthly benefit will be around $1,822.39 after adding 8.7% to this amount.
The Social Security payment increases are intended to reflect the inflation recipients have experienced over the last year. Therefore, beneficiaries should not anticipate an improvement in their living standard due to this yearly rise.
Medicare Part B will see a slight deduction.
Most Social Security and Medicare recipients have their Medicare Part B premiums taken straight from their Social Security payments. The monthly Medicare Part B cost will decrease from $170.10 in 2024 to $164.90 in 2024. This monthly decrease of $5.20 may not seem like much, but every little bit helps.
That has the potential to be very advantageous in the future. A “keep harmless” provision governs the connection between Medicare Part B premiums and Social Security. If your Medicare Part B premiums are taken from your Social Security check, Medicare Part B premium increases cannot exceed the rise in your Social Security income. Note that the keep harmless rule does not apply if you pay a Medicare Part B premium income-related fee.
Payroll Tax
The payroll tax for Social Security will be collected on higher income levels.
Payroll taxes paid by working individuals finance the majority of Social Security’s payments. Social Security taxes will be paid on the first $160,200 workers’ income, up from $147,000 in 2024. This $13,200 rise reflects the greatest increase in Social Security-taxable wages in the program’s history.
This move results in a $1,636.80 tax increase for higher-income earners (half paid directly by the taxpayer and half paid by the employer on the taxpayer’s behalf).
This increase can assist Social Security in the short term since it increases the likelihood that the system will receive more income to pay existing payments. Because people’s benefits depend on their covered wages throughout their working years, the long-term impact on Social Security is diminished. Consequently, those who pay higher taxes now will be entitled to greater benefits when they begin collecting.
Social Security is most likely moving closer to running out.
According to the most current assessment by Social Security’s trustees, the program’s trust funds are projected to run dry by 2035, just twelve years till 2024.
Social Security’s forecasts assume inflation rates of 4.54 percent in 2024, 2.33 percent in 2024, and 2.40 percent after that. Inflation was more than anticipated in 2024, as indicated by beneficiaries’ large rise forecast for 2024. According to the official Social Security estimate, inflation benefits the program’s trust funds, as larger taxes are collected now, but bigger payments are provided later.
Possibly, if the inflation is accompanied by a generally thriving economy and rising earnings in an inflationary climate characterized by economic stagnation — or stagflation — the effect may damage the health of Social Security’s trust funds. This is because benefits rise based on inflation, but the program’s tax income increases based on rising salaries. If salaries do not keep pace with inflation due to poor or negative economic development, the depletion date of the trust funds might be accelerated.
Treat Social Security how it was intended to be treated, and you’ll probably be alright.
Despite the significant role that Social Security plays in so many people’s retirement planning, it was never intended to be the primary source of income during retirement. It covers around 40% of people’s pre-retirement salaries, with higher coverage for low-income employees and lower coverage for high-income workers.
With that viewpoint in mind, it was already vital to have a plan in place to meet the amount of your retirement demands that Social Security won’t. Depending on what you anticipate will occur in 2024 it is rather simple to make modest modifications depending on what you anticipate will occur in 2024.
If you do not have a plan in place, the changes to Social Security in 2024 should serve as a wake-up call to implement one immediately. By starting early, you can make the necessary modifications to position yourself for a financially secure retirement.