Social Security underwent significant changes this year. Staying informed is crucial for the millions of Americans who receive a monthly check, particularly those who rely solely on it during their retirement years.
Here are the top five things you need to know:
1. Cost of Living Adjustment (COLA) May Decrease Next Year
Social Security benefits rose by 3.2% at the beginning of the year, reflecting the annual cost-of-living adjustment (COLA) designed to help senior citizens preserve their purchasing power amidst inflation.
Social Security recipients are expected to receive an estimated 2.66% COLA in 2025, based on the inflation data from the first few months of 2024.
READ ALSO: Why Social Security Is Particularly Crucial for Older Women's Financial Security?
2. The Social Security Tax Wage Cap Has Increased
Social Security's primary source of funding is payroll tax revenue. Still, workers are not guaranteed to pay these taxes on their entire salary because of the wage cap, which determines the maximum income based on Social Security taxes.
The wage cap for Social Security taxes increased to $168,600 in 2024, up from $160,200 the previous year, and is expected to rise again next year, with some lawmakers advocating for a substantial increase.
President Biden has pledged to bolster Social Security for future retirees, including taxing earnings over $400,000 for Social Security purposes as part of his plan. It remains uncertain whether lawmakers will approve that proposal and whether it would lead to higher earners becoming eligible for a more considerable maximum monthly benefit from Social Security by contributing more money to the program.
3. Qualifying for Social Security has Become More Challenging
Individuals must accumulate 40 work credits over their lifetime to collect Social Security in retirement, with a maximum of four credits per year. Social Security relies on payroll tax revenue to remain sustainable, and increasing the requirement for workers to earn more credits to qualify for benefits contributes to this goal.
4. Higher Income Thresholds for Persons With Disabilities (PWD)
Social Security serves millions of Americans who receive disability benefits, not just retirees. According to Moneywise, both blind and non-blind workers will see an increase in their earned income threshold.
Blind workers will receive up to $2,590 monthly, in addition to their regular disability benefits, compared to $2,460 in 2023. Non-blind workers can now collect up to $1,550 monthly, $80 more than the previous year, and their regular Social Security benefits.
5. Payouts at Full Retirement Age Increase
Individuals who reach full retirement age (FRA) become eligible to receive 100% of their retirement benefits. While collecting benefits before reaching FRA results in receiving only a portion of their benefits, delaying benefits collections allows them to receive even more, with the amount they benefit from waiting to increase this year.
As of January 1, recipients can now receive up to $3,822 per month, nearly $200 more than the amount they received last year. This increase is positive news for individuals who had higher earnings before retirement, as the monthly benefit amount is based on the individual's earnings throughout their working years.
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