Because Social Security has been around for decades, you might think that the system would stay pretty much the same from year to year. But that’s not necessarily the case.
social security There are some pretty notable changes already happening in 2024, and as we’re halfway through the year, it’s important to take note of these key points.
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1. Benefits increased 3.2% in 2024, but next year’s COLA may not be as high
In early 2024, Social Security benefits increased by 3.2%. Social Security benefits are subject to annual cost-of-living adjustments (COLAs) to help seniors maintain their purchasing power in the face of inflation.
Social Security recipients will apparently be subject to the COLA in 2025. But because the pace of inflation is slowing, next year’s increases may not be as generous as this year’s.
The current estimate is that 2.66% Colabased on inflation data collected during the first few months of 2024. However, because Social Security COLAs are calculated based on third-quarter inflation data, the current projections are subject to change.
2. The wage cap for Social Security taxes was raised.
Social Security is primarily funded by payroll tax revenues, but workers do not of course pay tax on their entire salary because there is a wage cap set each year that determines how much income is taxable for Social Security purposes.
The wage cap rose to $168,600 in 2024, up from $160,200 the year before. Next year, the Social Security wage cap could rise again, but some lawmakers want to see a bigger increase to the wage cap.
President Biden has promised to strengthen Social Security for future retirees, and part of his plan is Tax on income over $400,000 It’s not yet clear whether lawmakers will approve the proposal, and whether higher-income earners would be able to receive larger maximum monthly benefits from Social Security by paying more into the program.
3. It’s getting harder to qualify for Social Security, but that’s not a bad thing.
To receive Social Security benefits after retirement, you need to earn 40 work credits in your lifetime, up to four credits per year. The value of the work credits has increased from $1,640 last year to $1,730 in 2024.
But the fact that the work credit is rising in value isn’t such a bad thing: Social Security needs payroll tax revenue to survive, and requiring workers to earn a little more to qualify for benefits helps achieve that goal.
While it’s natural to assume that Social Security will stay the same from year to year, it’s important to stay up to date on the system whether you’re currently retired or just joining the workforce. You never know when some change might affect your finances.
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