3 Big Changes to Social Security That You Might Have Overlooked Amid the Hoopla About the 3.2% COLA

Search for the phrase “Social Security” using your favorite web browser. You’ll see a boatload of articles talking about the benefits increase that’s on the way next year. That’s understandable. The amount that Social Security payments will be adjusted to help offset a rising cost of living is a major story.

However, it’s not the only development related to the federal program that’s worthy of note. Here are three big changes to Social Security coming up in 2024 that you might have overlooked amid the hoopla about the 3.2% cost-of-living adjustment (COLA).

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1. A higher taxable maximum

One key change to Social Security will affect many Americans who don’t yet receive any benefits from the program. The maximum amount of earnings subject to the Federal Insurance Contributions Act (FICA) payroll tax will increase to $168,600 in 2024 from $160,200.

This 5.2% increase to the taxable maximum is a much smaller hike than we saw for 2023. Last year, the Social Security Administration (SSA) raised the threshold by nearly 9%. 

Workers will have to pay a 6.2% payroll tax on all earnings of up to $168,600 beginning next year. Employers (including self-employed individuals) will also pay an additional 6.2% tax.

2. A higher earnings limit for beneficiaries below their full retirement age

There’s a potential double whammy in store for anyone who begins collecting Social Security retirement benefits before the full retirement age and continues to work. The first part is the financial penalty that permanently reduces your monthly benefit. The second part is that Social Security will “claw back” some of your earnings if you make too much money.

In 2023, the SSA will deduct $1 from your retirement benefit for every $2 you make above $21,240. That earnings limit will increase to $22,320 in 2024.

There is a special rule, though, for the first year you retire. If you make more than the annual earnings limit in that first year, you’ll receive your full Social Security benefit for any whole month during the year that you’re retired. 

Also, you won’t lose the deducted amount forever. When you reach your full retirement age, your monthly benefit will increase to start paying you back for the money “clawed back” earlier. 

3. A higher earnings limit for beneficiaries reaching their full retirement age in 2024

There’s another twist to the Social Security rules on continuing to work while receiving retirement benefits before your full retirement age. The SSA will deduct $1 from your benefits for every $3 earned (instead of every $2) above a specified earnings limit during the year in which you reach your full retirement age.

In 2023, this earnings limit is $56,520. However, next year the limit will increase to $59,520. 

Note that once you reach your full retirement age, these earnings limits go out the window. None of your earnings will be subject to deductions, no matter how much you make.