This week, the Social Security Administration announced changes taking place in Social Security for the upcoming year, 2024. These adjustments will have a direct impact on the monthly benefits received by retirees and the taxable maximum for earnings subject to the Social Security tax.
According to the latest announcement on October 12, 2023, more than 66 million retirees who currently receive Social Security benefits will witness a significant increase in their monthly government payments. This increment of 3.2% is attributed to the Cost-of-Living Adjustment (COLA) for the year 2024.
Starting in January 2024, the average Social Security retirement monthly benefits are projected to grow by over $50. This is a result of the SSA’s effort to align the benefits with the rising cost of living, thereby ensuring that retirees can maintain a reasonable standard of living.
The rationale behind this COLA increase lies in the economic events of 2022. Inflation rates soared during that year, compelling the Federal Reserve to take proactive measures to stabilize the economy. They opted to raise interest rates, a decision that led to a moderation of inflation levels throughout 2023. This proved to be a relief for consumers who were grappling with the adverse effects of heightened inflation.
Furthermore, earlier in 2023, Social Security recipients witnessed a notable 8.7% increase in their benefits, marking one of the most significant COLA adjustments in recent decades. This substantial increase was a response to the soaring inflation of the previous year, surpassing the already substantial 5.9% COLA beneficiaries received in 2022.
In addition to the COLA adjustment, Social Security undergoes other annual adjustments based on the increase in average wages. Accordingly, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will rise to $168,600 from $160,200, effective January 2024, reflecting changes in wage levels.
As always, we are here to address any questions or concerns you may have regarding these Social Security changes and how they may impact your financial planning. Please feel free to reach out at your convenience.