We are now very close to the end of the year, and you will be busy planning for 2024. One of your plans could be to sign up for Social Security. If that is the case, there are several factors that you need to keep in mind before you sign up for Social Security. Along with these factors, you also need to consider new changes to Social Security that could impact your benefits. In this article, we will detail points to consider before you claim Social Security in 2024.
Following are the points to consider before you claim Social Security in 2024:
Determine your full retirement age
Your full retirement age (FRA) is the age when you are entitled to your full benefits. The FRA depends on your birth year. For example, those born between 1943 to 1954, the FRA is 66 years. The FRA increases by 2 months for every birth year after 1954, i.e., 66 years and two months for those born in 1955, 66 years and four months for 1956 and so on.
Although you can claim Social Security well ahead of FRA (as early as age 62), claiming early will result in you getting a reduced monthly payout for life.
A point to note is that Social Security may be forced to reduce benefits in about 10 years’ time unless lawmakers come up with a way to manage an impending funding shortfall. In case lawmakers fail, you don’t want to further reduce your benefits by claiming them before FRA.
Check if the estimated benefit meets your expectations
It is very disappointing if your Social Security check is much smaller than what you expected. Thus, it is important that you have an idea beforehand of your benefit amount. You can easily do that by creating an account on the Social Security Administration’s website.
If you find that your benefits would be much smaller than your expectations, then you could consider postponing your filing beyond 2024. It is important for you to know that you can boost your benefits by delaying claiming the benefits past FRA.
Whether or not you plan to work next year
If you plan to work and claim Social Security, it is possible but not recommended. It is because the Social Security Administration (SSA) may withhold some of your benefits in this case.
For instance, if you are only 63 and working, and intend to claim Social Security next year, then the SSA will withhold $1 in Social Security per $2 of earnings if your income is more than $22,320 in 2023.
The amount withheld isn’t lost forever, as the SSA will add it to your benefits once you reach FRA. However, the money won’t be available to you immediately. Thus, it is better that you decide beforehand whether or not you plan to continue working and claim Social Security.
Above, we detailed the points to consider before you claim Social Security in 2024. Now, we will detail the Social Security changes in 2024 that could impact your benefit amount, and in turn, your decision to claim the benefits.
COLA increase
The COLA raise for 2024 will be just 3.2%, significantly less than in 2023 but still more than the 2.6% average over the past couple of decades. This increase will impact all recipients differently depending on the type of benefit and when they claimed it.
More income will be taxed
In 2024, the maximum amount of earnings subject to the Social Security payroll tax will jump to $168,600, compared to $160,200 now. This increase, however, impacts mostly those with high salaries.
Workers pay a 7.65% tax from their salary towards Medicare and Social Security, called FICA (Federal Insurance Contributions Act). This 7.65% includes 1.45% towards Medicare, and the remaining 6.2% is for Social Security, and applies only to the taxable maximum, i.e., $168,600 for next year.
According to the SSA, about 6% of workers who pay Social Security taxes have income higher than the taxable maximum every year.
Increase in maximum Social Security benefit
In 2024, the maximum Social Security benefit for a person retiring at full retirement age will increase to $3,822 from $3,627 this year. This increase will mainly benefit those claiming Social Security at FRA.
Higher spousal and disability benefits
Average benefits of widowed mothers with two children will rise to $3,653 per month next year from $3,540 presently. Similarly, the average benefits will increase to $1,773 per month (from $1,718 now) for aged widows and widowers living alone. The average benefit for disabled workers with a spouse and one or more children will rise to $2,720 from $2,636.
Higher earnings test
Those who plan to continue working, as well as claim Social Security next year, will be subject to a higher earnings test. The income exempt from the earnings test will rise to $22,320 next year, compared to $21,240 in 2023. As noted above, the SSA will withhold $1 in benefits for every $2 in earnings above that limit. The earnings test, however, doesn’t apply if you reach FRA.
More SSI payment standards
In 2024, the SSI Federal Payment Standard for individuals who receive Supplemental Security Income (SSI) benefits, as well as Social Security will rise to $943 per month in 2024 from $914 in 2023. It will increase to $1,415 from $1,371 a month for couples.
