Important Changes to Social Security in 2024

More than 70 million Americans collect Social Security benefits – and each year, the federal government makes changes and updates to the program. 

Here are 3 changes Social Security recipients need to look out for in 2024.

Employers and Self-Employed Social Security tax

The Social Security wage base, comprised of maximum earnings (W2 and self-employed net income) subject to Social Security tax, will increase from $160,200 in 2023 to $168,600 in 2024. That is an increase of $8,400. The taxable wage base is the maximum amount of earned income that employees and self-employed persons must pay Social Security taxes on.

The 2024 employer withholding rates are as follows:

• 6.2% Social Security tax on the first $168,600 of employee wages (maximum tax is $10,453.2)
• 1.45% Medicare tax on all earnings up to $200,000 of employee wages
• People who make over $200,000 ($250,000 for Married couples filing jointly) get taxed the 1.45% and an additional 0.9% on all employee wages.

Cost of Living Adjustments (COLA) for Social Security and Supplemental Security Income (SSI) Beneficiaries

Every year since 1975, the Social Security Administration (SSA) has increased benefits based upon the increases in cost of living per the Consumer Price Index. The SSA inflation adjustment for benefits for 2024 will be 3.2%. Both SSA and SSI beneficiaries will receive a COLA notice containing the exact amounts of their new benefits in December 2023. The notice will be available online in the SSA Message Center of the My Social Security account.

Here is a link to create an account online: (https://www.ssa.gov/myaccount/). 

Higher Earnings Limit for Workers Who Receive SSA Retirement Benefits

Per the SSA, you can continue working and still receive Social Security retirement or Survivor benefits. However, as noted below, benefits may be reduced if the income earned exceeds specific amounts. Different rules apply for a Social Security recipient who is disabled, but continues to work. 

Determining how much someone can earn and still receive Social Security benefits depends upon one's "full retirement age." For more information on this, follow the provided link, Full Retirement Age. Below are the base earning amounts that have been increased for 2024.

• If you receive SS benefits while working and are at full retirement age or older, you may keep all your benefits received, no matter how much you earn.
• If you receive SS benefits while working and have yet to reach your full retirement age by the end of the year, your benefits are reduced by $1 for every $2 earned above $22,320 per year or $1,860 a month.
• If you receive SS benefits while working and reach your full retirement age by the end of the year, your benefits are reduced by $1 for every $3 earned above $59,520 per year or $4,960 a month. This limit only applies to the earnings received before reaching full retirement age. 

Conclusion

While not as high as the 8.7% increase last year (which was the highest since 1981) the 3.2% Social Security COLA increase for 2024 should be good news for Social Security recipients. Also, the increase in allowable earnings will benefit some recipients. An entire summary of the 2024 changes is available at SSS Cola Fact Sheet 2024.

Contact your Herbein + Company, Inc. tax consultant with any questions you may have regarding your Social Security status.

Article contributed by Giavana D. Hartzell