2024 Social Security Changes and Why You Should Care
Oct 13, 2023
As the year 2024 approaches, the Social Security Administration has unveiled some noteworthy updates to the Social Security program. This is more than just news; it's information that directly impacts your financial planning and retirement outlook. So, let's delve into what the 3.2% increase in Social Security benefits for 2024 means for you, particularly if you're a Sherman Private Wealth client.
The 2024 Social Security Changes Unveiled
Maximum Taxable Social Security Earnings Increase
One of the key takeaways is the increase in the maximum taxable Social Security earnings, also known as OASDI earnings. In 2024, this limit will be raised to $168,600. This change is essential for those individuals earning beyond this threshold, as they won't pay Social Security taxes on income exceeding this amount. It's a significant adjustment that could have implications for your overall financial strategy.
Earnings Test Exemption Under Full Retirement Age (FRA)
For individuals who have not yet reached Full Retirement Age (FRA), the earnings test exemption has been increased to $22,320 per year. While this might sound encouraging, there's a catch: for every $2 in earnings above this limit, $1 in benefits will be withheld. This adjustment underscores the importance of strategic income planning, particularly for those who intend to continue working while receiving Social Security.
Earnings Test in the Year of Reaching FRA
As you approach your Full Retirement Age (FRA), the earnings test limit for that year will be $59,520. In this case, $1 in benefits will be withheld for every $3 in earnings above this limit. This serves as a reminder of the complex and nuanced decisions you'll need to make about retirement timing and income planning.
Maximum Social Security Benefit Increase
For those considering retirement at Full Retirement Age (FRA), there's more good news. The maximum Social Security benefit for such individuals will increase to $3,822 per month. This is a substantial uptick that could significantly influence your retirement income planning strategy.
Implications for Sherman Private Wealth Clients
Now, let's take a closer look at what these changes mean for you.
Benefit Notification Process
Starting in early December, the Social Security Administration will begin notifying individuals about their new benefit amounts through the mail. It's crucial to keep an eye on your mailbox to ensure you don't miss this essential information.
Creating a “my Social Security” Account
If you have not yet created a "my Social Security" account and wish to view your benefit increase, it is essential to do so by November 14th. This user-friendly online portal provides a seamless way to stay informed about your benefits and access important documents. To set up a “my Social Security” account, click here.
Comparing to Previous Increases
While the 3.2% increase for 2024 may appear smaller compared to the previous two years, with 8.7% in 2023 and 5.9% in 2022, it's important to understand that these percentages are subject to various economic factors and conditions. This adjustment still holds significant weight for your financial outlook and should not be underestimated.
Consideration of the CPI (Inflation) Index
The Cost-of-Living Adjustment (COLA) is intricately tied to the Consumer Price Index (CPI). As of now, the CPI has experienced a year-over-year increase of approximately 3.7%. Projections suggest it will end the year at around 3.5-3.6%. This is worth noting as it exceeds the announced COLA, indicating the potential for continued adjustments in the future.
It's worth highlighting that the Cost-of-Living Adjustment remains higher than the federal government's projected long-term CPI inflation rate of 2.3%. This indicates the possibility of a consistent upward trend in benefits, offering valuable support for your retirement planning.
The 3.2% increase in Social Security benefits for 2024 is more than just a statistical figure; it's a piece of information that can significantly impact your financial future. At Sherman Private Wealth, we encourage you to seize the opportunity to be well-informed about these changes and make strategic decisions that align with your long-term financial goals. As always, we are here to provide guidance, support, and expertise in navigating these financial adjustments while seeking to ensure that your financial future remains secure and prosperous.