Social Security Administration (SSA) announced three major changes for October 2024, including a 2.5% COLA increase, a rise in maximum taxable earnings, and an adjustment to retiree earnings limits. As a result of these changes, beneficiaries will be able to cope with inflation while enjoying greater financial flexibility. By visiting the SSA’s official website, you can stay informed and understand how these changes will impact your benefits.
3 New Changes Announced by Social Security: SSA has officially announced three major changes that will impact millions of Americans beginning in October 2024. Social Security benefits and retirement planning can be affected by these updates, which can affect monthly payments, tax obligations, and overall retirement planning.
You will learn about the key changes in this article and learn how they will affect you. The Cost-of-Living Adjustment (COLA) and changes to taxable earnings will also be covered along with the adjusted earning limit for retirees. You can use this guide regardless of whether you’re currently receiving Social Security or planning to file in the near future.
Social Security Announced 3 New Changes
Social Security’s three major changes confirmed for October 2024 will affect millions of Americans’ benefits, income limits, and taxable earnings. You can make better financial decisions if you stay informed about these changes and understand how they will affect you, regardless of whether you receive benefits or plan to retire.
A 2.5% COLA increase, changes in taxable earnings, and adjusted earnings limits are all intended to help beneficiaries keep up with the rising costs of living, while also offering flexibility to those who work into retirement.
| Key Information | Details |
|---|---|
| New COLA (Cost-of-Living Adjustment) | A 2.5% increase in benefits, beginning January 2025 |
| Maximum Taxable Earnings Increase | Maximum earnings subject to Social Security tax increases to $176,100 |
| Earnings Limit for Early Retirees | Retirees under full retirement age can earn up to $23,400 before reductions apply |
| Earnings Limit for Full Retirement | Retirees reaching full retirement age can earn up to $62,160 before reductions apply |
| Start Date for Changes | New changes come into effect starting October 2024, with COLA impacting payments starting January 2025 |
| Official Reference Link | Social Security Administration (SSA) |
Cost-of-Living Adjustment (COLA) for 2025
Social Security benefits will increase 2.5% in October 2024, as part of the annual Cost-of-Living Adjustment (COLA). Since the price of essential goods and services is continuously rising, this adjustment aims to help beneficiaries keep up with inflation.
What does this mean for you?
Your Social Security benefit would increase by $25 if your benefit increased by 2.5% to $1,025 per month. All of these costs are on the rise, including healthcare, housing, and everyday living costs.
Who benefits?
- Americans receive Social Security benefits in the amount of nearly 68 million.
- People receive Supplemental Security Income (SSI) in the amount of around 7.5 million.
SSI beneficiaries will first see the COLA increase starting December 31, 2024, while Social Security beneficiaries will see it beginning January 20, 2025.
Check out the official SSA page on COLA changes for more information.
In 2025, maximum taxable earnings will increase
The second big change affects how much of your income is taxed by Social Security. Social Security taxes will be imposed on earnings over $168,600 in 2025, up to $176,100 in 2025.
How does this affect higher earners?
A person who earns more than $176,100 per year does not have to pay Social Security tax on income above that amount. Employees and employers will both be responsible for paying 6.2% of their income towards Social Security.
Example:
- 2024: An individual earning $180,000 was only taxed on the first $168,600 of his or her income.
- 2025: Social Security taxes will be levied on the first $176,100 of their income, which means an additional $7,500 will be collected.
Higher-income workers will primarily be affected by this change since they will now be taxed for Social Security at a higher rate, potentially increasing their future benefit payments.
Retirees’ Earnings Limits Adjusted
You also have good news if you’re still working and receiving Social Security benefits before you turn 65. A new earnings limit has been set by the Social Security Administration for those who have not yet reached full retirement age.
Earnings limits will increase to $23,400 in 2025. You cannot have your benefits reduced if you earn up to $23,400 before reaching full retirement age.
What is the process?
A person earning more than the limit will have $1 deducted from their benefits for every $2 earned over the limit. By 2025, the earnings limit will increase to $62,160 for individuals who reach full retirement age.
Why is this important?
As a result of this increase, retirees are allowed to continue working part-time or in lower-income jobs without dramatically affecting their Social Security benefits. As seniors adjust to retirement, it allows them more financial flexibility.
Your benefits won’t be reduced once you reach full retirement age, so you can earn as much as you like without reducing them.
Visit the SSA’s official guide to find out more about the earnings test.
Social Security: 3 New Changes You Need to Know
The following are the three major changes confirmed for October 2024. However, beneficiaries and future retirees should take note of the following factors:
Medicare Premiums and Deductions
Medicare Part B premiums are often covered by Social Security for retirees. Benefit recipients should be aware that while COLA increases can boost Social Security income, Medicare premiums can also rise. Some of these increases could offset a portion of the COLA increase.
Medicare Part B premiums for 2025 have not been finalized yet, but it is something to keep an eye on. The Income-Related Monthly Adjustment Amount (IRMAA) may also affect Medicare premiums for retirees with higher incomes.
Retired credit deferrals
If you are considering delaying retirement past full retirement age (FRA), you should know that your monthly benefit will increase as long as you wait. When you delay retirement until age 70, you can earn delayed retirement credits that can boost your benefits by up to 8%.
Frequently Asked Questions (FAQs)
1. How soon will the COLA increase take effect?
- A COLA increase of 2.5% will become effective for Social Security recipients in January 2025, and for SSI recipients in late December 2024.
2. What is the impact of an increase in taxable earnings?
- If you make less than $176,100, this change will not affect you. In 2025, a greater percentage of your income will be subject to Social Security tax if you earn more.
3. Can I receive Social Security benefits while I work?
- Yes, but if you’re under full retirement age, your benefits may be reduced if you earn more than $23,400 a year. You can earn as much as you like once you reach full retirement age.
4. How does delaying my claim for Social Security affect me?
- You will receive a 8% increase in your benefits every year you delay your claim beyond the age of full retirement.
