Social Security Benefits Will Rise 3.2% in 2024
On Thursday, October 12, 2023, the Social Security Administration announced that Social Security benefits will increase by 3.2% in 2024. This is a significant decrease from the 8.7% increase in 2023, which was the largest increase in four decades.
3.2% in 2024
The 3.2% increase will average $59 more per month for Social Security beneficiaries. The average monthly check will be $1,907, up from $1,848 in 2023. The increase will take effect starting in January 2024. This is a significant decrease from the 8.7% increase in 2023, which was the largest increase in four decades.
- The COLA increase will apply to Supplemental Security Income (SSI) benefits.
- The maximum amount of earnings subject to Social Security tax (taxable maximum) will increase to $168,600 in 2024.
- The COLA increase will not apply to Medicare Part B premiums, which are expected to increase by 5.9% in 2024.
Why the decrease in the increase?
The cost-of-living adjustment (COLA) for Social Security benefits is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W is a measure of inflation that tracks the prices of goods and services that are commonly purchased by urban wage earners and clerical workers.
The CPI-W increased by 8.7% in the year ending September 2022, which is the highest rate of inflation in the United States since 1981. However, the CPI-W is expected to moderate in 2023, which is why the COLA for 2024 is lower.
What does this mean for Social Security Beneficiaries?
The 3.2% increase in Social Security benefits will help to offset the rising costs of living, but it is important to note that it will not fully keep up with inflation. This means that Social Security beneficiaries may still see their purchasing power decline in 2024.
- The COLA increase is lower than the current inflation rate, which means that Social Security beneficiaries will still be losing purchasing power.
- The COLA increase is not enough to keep up with the rising cost of healthcare, which is a major expense for many Social Security beneficiaries.
- Many Social Security beneficiaries rely on their benefits to meet their basic needs, such as food and housing. The COLA increase will help to ensure that they can continue to afford these necessities.
Review your Retirement Strategy
What are the Income Limits for 2024?
The maximum amount subject to Social Security tax will increase to $168,600.
The Social Security Administration sets its income limits for people receiving Social Security benefits yearly. This is the amount you are allowed to earn without getting a reduction on your Social Security payments. If you make more than the limit ($22,320 in 2024), your benefits will be reduced (if you are younger than the retirement age). Luckily these reductions will be returned to you when you reach full retirement. The social security benefits are only withheld temporarily.
If you’re younger than full retirement age during all of 2024, they will deduct $1 from your benefits for each $2 you earn above $22,320. If you reach full retirement that year, the limit changes to $59,520 (2024). They will deduct $1 in benefits for every $3 you earn above the limit.
If you are older than full retirement and decide to work, you will receive your full benefits; there are no income limits.
For more examples, visit ssa.gov.
*note: there are different rules if you work outside the country or are on disability.
You will automatically enroll in Original Medicare (Part A and Part B) when you turn 65. Check before signing up for Medicare Part B if you or your spouse are still covered under an employer-provided group health plan.
What can Social Security Beneficiaries do?
There are a few things that Social Security Beneficiaries can do to prepare get the most out of their benefits:
- Review your budget. Take some time to review your budget and see how the increase in your benefits will impact your spending.
- Plan for retirement. If you are retired, the increase in your benefits can help you to maintain your retirement lifestyle. However, it is important to continue to plan for retirement and to make sure that you have enough savings to last throughout your retirement years.
- Consider annuity guaranteed income. Annuities are a financial product that can provide a regular stream of income, which can complement your Social Security benefits. Exploring annuity options may help you secure additional financial stability during retirement. Work with a licensed financial services professional to determine if this strategy fits your needs
- Check if it could be more beneficial to wait to collect benefits. Waiting to collect Social Security benefits can be better because it can result in higher monthly payments. If you wait until your full retirement age or later, you’ll receive larger monthly payments, which can help you cover your expenses in retirement. Additionally, if you delay your benefits until age 70, your monthly payments will increase even more. This can be especially beneficial if you expect to live a long time in retirement and need a reliable source of income. However, the decision to wait ultimately depends on your individual circumstances and financial goals.
The 3.2% increase in Social Security benefits will be a welcome relief for many beneficiaries. However, it is important to remember that inflation is still high and that the increase in benefits will not fully keep up with the rising cost of living. Social Security recipients should review their budget and plan for retirement accordingly.
Frequently Asked Questions About Social Security Benefits
When can I start receiving Social Security benefits?
- You can start receiving Social Security benefits as early as age 62, but your full retirement age (FRA) depends on your birth year. It typically ranges from 65 to 67. You can choose to delay benefits beyond your FRA, which may result in higher monthly payments.
How is my Social Security benefit amount calculated?
- Your benefit amount is calculated based on your highest-earning 35 years of work, adjusted for inflation. The Social Security Administration uses a formula to determine your average indexed monthly earnings (AIME), which is then used to calculate your primary insurance amount (PIA), the base for your monthly benefit.
Can I work and still receive Social Security benefits?
- Yes, you can work while receiving Social Security benefits, but if you are under your full retirement age, there is an earnings limit. If you earn more than this limit, a portion of your benefits may be withheld. After reaching your FRA, you can work and earn without any benefit reduction.
What is the maximum Social Security benefit I can receive?
- The maximum benefit varies depending on the year you retire, but in 2021, the maximum monthly benefit at full retirement age was $3,895. This amount can change with inflation and higher-earning individuals may receive a higher maximum benefit.
Is it better to start collecting benefits early or wait until full retirement age?
- The decision to collect benefits early or wait depends on your individual circumstances. Starting early means smaller monthly payments but more of them, while waiting until FRA or later results in larger monthly payments but fewer of them over your lifetime. The optimal choice varies for each person.
How are Social Security benefits taxed?
- Social Security benefits can be subject to federal income tax if your combined income (including half of your Social Security benefits, plus other income) exceeds a certain threshold. The percentage of benefits subject to tax depends on your income level.
What happens to my benefits if I’m divorced or widowed?
- If you are divorced, you may be eligible to receive benefits based on your ex-spouse’s record if you were married for at least ten years and meet certain conditions. If you are widowed, you may be eligible for survivor benefits, which can be based on your deceased spouse’s or ex-spouse’s earnings.
Can I receive Social Security benefits from a spouse’s or ex-spouse’s work record?
- Yes, if you meet certain criteria, you can receive benefits based on your spouse’s or ex-spouse’s earnings, including a spousal benefit or a divorced spousal benefit.
What is the cost of living adjustment (COLA), and how does it affect my benefits?
- COLA is an annual adjustment to Social Security benefits to account for inflation. It helps ensure that your benefits retain their purchasing power, and it typically results in a modest increase in your monthly payments.
How do I apply for Social Security benefits, and what documentation do I need?
- You can apply for Social Security benefits online, by phone, or in person at a Social Security office. You will need documents such as your Social Security card, birth certificate, and information on your work history, earnings, and banking information for direct deposit.