This year, Social Security is facing a series of significant changes designed to cope with financial challenges and adapt to the changing needs of the population every day. This year, as every year, something will change with Social Security. Most retired or working Americans will feel the impact. With several changes scheduled for this year, where most will give a financial boost, but some with the adverse effect. The change that generates the greatest impact is the increase in the cost of living adjustment (COLA), this generates an increase in social security payments.
This 2024 the (COLA) is 3.2%, a decrease of almost two thirds in reference to the 2023 adjustment, even so it is above the average of 2.6% of the last twenty years; The beneficiaries will feel the impact; however, it will depend on each type of benefit and when they claimed it. For Social Security retirement recipients, this 3.2% increase will increase their monthly payment by $59, on average, according to The Motley Fool, and those with disabilities will see an increase of $48 on average. While it is true that this increase provides financial relief for many of the beneficiaries, it is crucial to recognize that there are challenges regarding the long-term stability of the Social Security system, due to inflation, demographic changes and other factors that may continue to affect the ability of the program to meet obligations in the future.
More Social Security Income Will Be Taxed: How Does This Affect You?
Increased the maximum amount of earnings from the Social Security payroll tax to $168,600 in 2024 from $160,200 in 2023, those with higher salaries have been impacted, those who work pay a tax (FICA) of 7.65% of their payroll, 6.2% of this goes to Social Security. According to CNBC, and other major US new media, using data from the Social Security administration, approximately 6% of workers subject to social security taxes have income that exceeds the taxable maximum annually.
Social Security benefits are taxed based on your combined income, which includes your adjusted gross income, nontaxable interest, and half of your Social Security benefits. The adjusted gross income (AGI) includes all of your taxable income minus specific deductions such as retirement plan contributions and student loan interest. Some interest income, such as from municipal bonds, may not be subject to federal income tax.
Half of your Social Security benefits are taxable: Take half of your Social Security benefits for the tax year, add up your AGI, the non-taxable interest, and half of your Social Security benefits. If your combined income exceeds a certain threshold, a portion of your Social Security benefits may be subject to federal income tax. Specific thresholds are set each year by the SSA.
The Maximum Social Security Benefit Increased: How Much and When?
The maximum social security benefit for citizens retiring at full retirement age increased to $3,822 this year, from $3,627 in 2023, according to CPA Practice Advisor.
This only affects those who apply for benefits in the FRA, who are between the ages of 66 or 67, depending on their Year of birth. Those who claim benefits in advance receive lower monthly payments.
These changes reflect the country’s ongoing commitment to ensuring the sustainability and effectiveness of its Social Security system in the midst of demographic and economic changes. However, its implementation entails an intense political debate due to the need to balance financial needs with the aim of protecting current and future beneficiaries.
