For over 49 million retired workers who depend on Social Security as a crucial financial lifeline, staying informed about the program’s annual changes is paramount.
With each passing year, Social Security undergoes adjustments that can impact retirement plans and financial well-being.
Anticipating Crucial Social Security Changes
As we approach 2024, here are three significant Social Security changes that retirees can anticipate.
- Earnings Limits for Beneficiaries Under Full Retirement Age Increase Retirees can begin receiving Social Security benefits as early as age 62, even while continuing to work.
However, beneficiaries who collect benefits before reaching their Full Retirement Age (FRA) might have a portion of their benefits withheld if their income surpasses certain thresholds, known as the retirement earnings test exempt amounts.
These thresholds vary based on whether a worker is below FRA for the entire year or if they will reach FRA within the current year.
As of 2023, those under FRA for the year face a $1 reduction in benefits for every $2 of income exceeding the annual limit of $21,240. Similarly, those reaching FRA in 2023 experience a $1 reduction for every $3 of income exceeding the annual cap of $56,520.
These figures are subject to annual updates based on changes in the national average wage index (NAWI).
The finalized 2024 retirement earnings test exempt amounts will be published by the Social Security Administration (SSA) in October 2023.
- Maximum Retired Worker Benefit Increases The maximum benefit a retired worker can receive is adjusted annually to reflect changes in the NAWI. As a result, the top retired worker benefit generally increases from one year to the next. For instance, the highest Social Security payout in 2023 is $4,555 per month, up from $4,194 in 2022.
Expectations are that the maximum retired worker benefit will continue to rise in 2024. The updated amount will be disclosed by the SSA in October 2023.
Over the past decade, this maximum benefit has seen an average annual increase of 3.1%. If this trend continues, the highest payout could reach $4,696 per month in 2024.
However, it’s important to note that very few retirees actually qualify for the maximum benefit. Achieving this requires consistent wages exceeding the maximum taxable earnings limit for at least 35 years – a situation that only around 6% of workers achieve in any given year, according to the SSA.
- Social Security Benefits Receive Modest Cost-of-Living Adjustment (COLA) Social Security benefits receive an annual cost-of-living adjustment (COLA) to counteract the effects of inflation.
Read more: Max Social Security Benefits: Reaching The Income Threshold
Modest COLA Projections and Potential Impact on Retiree Benefits
This adjustment depends on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter, covering July through September.
The COLA is calculated by dividing the third quarter CPI-W of the current year by that of the prior year.
This percentage increase (if any) then becomes the COLA for the following year. In 2023, an 8.7% COLA was granted, the highest since 1982, due to an 8.7% increase in the third quarter CPI-W for 2022.
Experts anticipate a more modest COLA ranging from 2.6% to 3.3% for 2024, which will be confirmed by the SSA in October 2023.
If this projection holds true, the average monthly retired worker benefit, currently at $1,837.29, could land between $1,885.06 and $1,897.92 per month in 2024.
As these changes unfold, retirees must remain vigilant to ensure their financial plans align with the evolving landscape of Social Security.
Read more: Social Security Windfall: Millions Receive $4,555 Direct Payment In Five Days
