Social Security alterations occurring this year could impact both present and prospective retirees. Amidst the commencement of 2024, significant adjustments have been implemented within the Social Security system. These modifications may have slipped under the radar for many individuals, yet they carry implications that could influence them directly. Below are key insights into the noteworthy shifts shaping Social Security in 2024 compared to previous years.
One of the initial and pivotal adjustments revolves around the shift in full retirement age (FRA). FRA denotes the age at which individuals become eligible to receive their standard Social Security payout without reductions due to early filing.
Social Security Changes in 2024
For those who turned 66 prior to 2024, FRA ranged between 65 and 66 and a half years. However, if you’re reaching 66 in 2024, your FRA stands at 66 and eight months. Subsequently, if your 66th birthday falls after 2026, your FRA will be 67 – the ultimate FRA irrespective of birth date. This delayed FRA implies that forthcoming beneficiaries must brace themselves to wait a bit longer for their full monthly entitlement. It’s crucial for prospective retirees to grasp this change, enabling them to either extend their working years or acknowledge a reduced retirement benefit.
Another modification impacts current retirees who are juggling work alongside Social Security benefits. For individuals in this scenario who haven’t reached full retirement age (FRA), there are constraints on earnings before their benefits are reduced.
If you won’t attain FRA throughout the year, you can earn up to $22,320 in 2024 without experiencing benefit reductions. Beyond that threshold, your Social Security payments diminish by $1 for every $2 earned. If you’re slated to reach FRA at any point in 2024 but haven’t yet, you can earn up to $59,520 before witnessing reductions of $1 for every $3 earned above that limit.
Although the reduction is temporary and benefits are recalculated at FRA to compensate for missed income, the loss of benefits can still pose challenges if you were relying on them. The positive aspect is that these limits have increased from $21,240 and $56,520 in 2023. Consequently, individuals striving to balance employment and Social Security can earn more this year without facing the temporary disappearance of a portion or all of their Social Security payments.
Increased Taxes for High Earners
There’s another significant change that might have slipped under your radar. The ceiling for wages subject to Social Security tax has been raised. In 2023, workers paid Social Security taxes on earnings up to $160,200. However, for 2024, this threshold has been increased to $168,600. Consequently, high earners with incomes exceeding $160,200 will be paying more in Social Security taxes this year.
Nonetheless, they will also receive larger future benefits since retirement benefits are calculated based on the average salary earned throughout their career, up to the maximum taxable wage. This maximum is in place to prevent excessively high earners from receiving disproportionately large benefits.
While you may not have noticed these significant shifts in Social Security yet, it’s essential to pay attention to them now. They could impact the timing of when you claim benefits, the extent to which you can work, and the taxes you’ll be liable for. These are critical financial considerations that warrant your attention.