Social Security Changes: What You Need to Know

You might imagine that Social Security remains mostly unchanged from year to year since it has been in place for so long. However, that's not always the case.

In 2024, Social Security had some rather significant changes already. As the year draws to a close, it's critical that you understand these crucial points.

The Cost of Living Adjustment for Next Year Could be Lower

Benefits from Social Security increased 3.2% in the beginning of 2024. An annual cost-of-living adjustment, or COLA, is available to seniors receiving Social Security payments. This increase helps seniors retain their purchasing power against inflation.

It seems obvious that Social Security beneficiaries will be eligible for a COLA in 2025. However, given that inflation isn't increasing as quickly as it was this year, the rise next year could not be as large.

According to current predictions, based on inflation statistics from the first few months of 2024, there will be a COLA of 2.66%. However, any current prediction is susceptible to change because Social Security COLAs are determined using third-quarter inflation statistics.

The Social Security Tax Wage Ceiling was Raised

Payroll taxes provide the majority of money for Social Security, but it is not certain that employees will pay these taxes on their whole income. This is due to an annual pay restriction that sets the maximum amount of income subject to Social Security taxes.

The pay ceiling increased to $168,600 in 2024 from $160,200 in the previous year. The Social Security wage ceiling is probably going to increase once again next year. Legislators, however, would want to see a significant increase in the pay ceiling.

Although a component of President Biden's proposal is taxing wages over $400,000 for Social Security reasons, he has committed to fortifying Social Security for future pensioners. Legislators may approve the idea, but it is unclear if it will mean higher earnings will receive a greater maximum monthly income from Social Security since they will have contributed more to the program.

It Is More Difficult to be Eligible for Social Security

At most four work credits every year, you must accrue 40 work credits over your lifetime in order to be eligible for Social Security benefits upon retirement. A labor credit's value increased to $1,730 in 2024 from $1,640 in the year before.

It's not as bad, but, that work credit value is increasing. Payroll tax money is vital to Social Security's survival, and raising the income threshold for eligibility contributes to that objective.

Although it's normal to think that Social Security benefits would not change from year to year, it's still vital to be informed on the program, regardless of whether you're a recent retiree or are just entering the workforce. You never know when a certain move can have a positive or negative effect on your money.

The content provided on MoneyTimes.com is for informational purposes only and is not intended as financial advice. Please consult with a professional financial advisor before making any investment decisions.