Social Security Beneficiaries Should be Aware of These Changes in 2024

Social Security Beneficiaries Should be Aware of These Changes in 2024

by | Accounting News, News, Newsletter, Social Security

As of January 1, 2024, a series of Social Security changes took effect, influencing both the benefits received by beneficiaries and the eligibility criteria. Whether you’re currently a beneficiary or in the process of applying this year, you’ll want to be aware of these significant changes. In this article we’ll go over the most important points to know.

New Year, Bigger Checks

Annually, the Social Security Administration (SSA) implements a cost-of-living adjustment (COLA) to ensure beneficiaries can keep up with rising expenses. The adjustment considers the percentage shift between average prices in the third quarter of the present year and the third quarter of the preceding year.

The COLA for 2024 is 3.2%, so monthly payments for recipients increased by that amount beginning in the new year. According to the SSA, that’s an average monthly increase of about $50.

When it comes to the timing of your payment, it still depends on your date of birth, adhering to Social Security’s standard payment schedule. Typically, if your birthday falls within the first through 10th day of the month, your payment will be processed on the second Wednesday. For those with birthdays between the 11th and 20th day of the month, payments are scheduled for the third Wednesday. If your birthday occurs after the 20th day of the month, you can expect your payment on the fourth Wednesday.

New Year, High Social Security Taxes

Because the Social Security tax wage base also increased by 5.2%, wealthy taxpayers could be subject to higher taxes. The Social Security tax wage base for 2024 is $168,600, which is up from $160,200. This means that some workers will be paying about $521 more in Social Security taxes than they would have paid if the wage base didn’t increase. Additionally, self-employed workers are taxed at 12.4%, meaning they could owe an extra $1,041.60.

Full Retirement Age and the Earnings Test

There are two significant factors to be mindful of when it comes to Social Security benefits: full retirement age (FRA) and the earnings test.

While you can begin receiving benefits as early as age 62, you become eligible for full benefits upon reaching the FRA, determined by your birth year.

For instance, if you were born in 1962, you would reach your FRA at 67 years old. However, if you were born in 1964, your FRA would be 67 years and 8 months, requiring an additional eight months of patience compared to those born in 1962. This illustrates how FRA varies based on the year of birth, impacting when individuals become eligible for full Social Security benefits.

As for the Social Security earnings test, this becomes relevant if you’re still working and earning income while receiving Social Security and have yet to hit FRA (it’s also why many experts suggest holding off until FRA).

Essentially, surpassing a specified income threshold triggers the SSA to withhold a certain amount above that limit. In 2024, for workers who won’t reach FRA the entire year, the earnings test cap is $22,320. This means $1 in Social Security benefits will be withheld for every $2 in earnings that exceed $22,320. For workers who will reach FRA at some point during the year, the earnings test cap is $59,520. This means $1 in Social Security benefits will be withheld for every $3 in earnings that exceed $59,520.

Keep in mind, this is just a temporary hold. Once you hit FRA, your benefit checks will factor in those temporary withholdings. Also note that earnings from investments or payouts from retirement plans, for instance, are not considered in the earnings test.

Top 12 Social Security Stats You Ought to Know

by | Accounting News, Fraud, IRS, News, Resources

While a majority of the population is covered by Social Security (SS) to some degree, many do not fully understand the program, resulting in frustration and confusion when it comes time to receive benefits. In an effort to curb miscommunication or misgivings, the Social Security Administration (SSA) has increased its informational output in recent years. The SSA’s 2017 fact sheet provided numerous statistics for future and current recipients, and we’ve outlined the top stats below.

  1. There are 171 million individuals covered by Social Security
    • To qualify for benefits, you must “earn” 40 work credits in your lifetime, with the ability to collect up to 4 credits annually (valued at $1,300 per credit)
  2. 71% of recipients are retired workers (in 2017)
    • SS payouts accumulate 8% from ages 62 to 70, so if you’re close to retirement, a great way to boost your payout is to wait to enroll
  3. The remaining 29% of benefits will go to the disabled and survivors
    • In 2017, approximately 16% of benefits will be received by disabled workers and the remaining 13% goes to survivors of deceased beneficiaries
  4. In 2017, 62 million Americans will receive $955 billion in benefits
    • Funding is acquired from 3 sources: interest on the program’s asset reserves, a 12.4% payroll tax on all earned income and the taxation of the benefits themselves
  5. 61% of seniors rely on their SS benefits for at least half their monthly income
    • 48% of married seniors and 71% of unmarried retirees depend on Social Security for at least half their income
  6. Of unmarried seniors, 43% rely on benefits for about 90% of their income
    • Close to half of single seniors look to Social Security to provide the majority of their income each month
  7. Most 65 year olds will live approximately 20 more years
    • In 1960, the average life expectancy was 70, but it has since increased to 79, which means it is wise to factor in a longer lifespan since the program is only intended to account for 40% of wages in retirement
  8. By 2035, the senior population is set to grow by 65%
    • Currently, those 65 and up number 48 million people, but the impending retirement of many baby boomers means that number could grow to 79 million over the next 18 years
  9. By 2035, the worker-to-recipient ratio will decline by 21%
    • Presently, the worker-to-beneficiary ratio is 2.8-to-1, but experts estimate that ratio could drop to 2.2-to-1 in the next 18 years
  10. In the event of a long-term disability, about 90% of workers have protection
    • While 67% of the private workplace does not offer long-term disability insurance, Social Security covers approximately 90% of workers ages 21 to 64 in the event of a work ending disability
  11. Of workers ages 20 to 49, about 96% do have protective insurance for survivors
    • Since one in eight 20 year olds won’t live to see age 67, at least the majority of those who work in covered employment have survivors protection insurance for surviving spouses and children
  12. One third of workers report having nothing set aside for retirement
    • With a potential 23% cut in benefits in 2034, the fact that 31% of the current working population has no money set aside, leaving them fully reliant on Social Security, is less than promising

In conclusion, although Social Security will be around for the long run, and likely covers more income than many believe, it would be wise to find secondary funding for retirement since Social Security was never intended to serve as your principal source.