3 Social Security changes retirees need to know about in 2024

Although Social Security has been around for decades, the program’s rules tend to evolve with the times. That’s a good thing, because changes to Social Security have the potential to benefit retirees enormously.

That said, not every change Social Security undergoes is a positive one. Here are three ways the schedule changed in 2024 — for better or worse.

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1. Benefits received a 3.2% increase.

Each year, Social Security benefits are eligible for a cost-of-living adjustment, or COLA. The purpose of the COLA is to help ensure that Social Security recipients can maintain their purchasing power as inflation makes the common costs of living more expensive over time.

In 2024, Social Security benefits received a COLA of 3.2%. Thus, the average monthly benefit was $1,848 at the end of 2023 to $1,907 at the beginning of 2024.

However, next year’s Social Security COLA is expected to be lower. It’s too early to have a handle on that number yet, as COLAs are based on third-quarter inflation data. But initial estimates call for a 2025 COLA of 2.57 percent, which is considerably less than the raise seniors received earlier this year.

However, the good thing about declining COLAs is that they are a sign of cooling inflation. So while Social Security benefits may not increase as much in 2025, retirees may at least benefit in that their expenses should not increase as quickly as in recent years.

2. Earnings test limit increased

Once you reach full retirement age, you don’t have to worry about the Social Security earnings test limit. Only when you work while receiving benefits before full retirement age does the earnings test limit come into play. Essentially, this limit dictates how much you can earn before you risk having some of your Social Security benefits withheld.

In 2023, the earnings test limit for seniors below full retirement age was $21,240. This year, it rose to $22,320.

There is a different limit for older people who have not reached full retirement age but will reach it before the end of the year. In 2023, that higher limit was $56,520. This year, it’s $59,520.

Earnings that exceed the earnings test limit put seniors at risk of having some of their benefits withheld, so it’s important to know what the limit looks like. However, retained benefits are not lost forever. They are added back into seniors’ monthly Social Security checks once they reach retirement age.

3. The salary cap has increased

Higher earners are not necessarily subject to Social Security taxes on all of their wages. Each year, the amount of wages that are taxed to fund the program is capped at a certain level.

In 2023, the salary cap was $160,200. This year, however, it was raised to $168,600. Many Americans won’t feel the sting because they pay Social Security taxes on their entire paycheck because it’s under the cap. But the Social Security wage cap is also likely to rise in 2025, and higher earners should prepare for that.

Clearly, a lot has happened with Social Security since the start of 2024. The program is likely to undergo some major changes in 2025 as well. It’s important for retirees and workers alike to pay attention to Social Security updates so there aren’t unpleasant surprises.