Among the nation’s most influential social programs is Social Security. For retirees, though, it’s rarely the most user-friendly tool. The one issue that retirees frequently voice concerns about is Social Security’s ongoing modifications. Nothing appears to be set in stone, whether it’s thresholds, eligibility requirements, or modifications. Retirees can prioritize concentrating on a few critical changes each year to help sort through the clutter. As we approach 2024, retirees should be aware of the following three facts regarding Social Security.
Social Security COLA; Source- MARCA
$1,000 Social Security Benefits Every Month
All it takes to observe the consequences of inflation is to stroll through any retail establishment. The purchasing power of people on fixed incomes, such as Social Security users, can be severely reduced by inflation. Imagine getting your Social Security benefits of $1,000 a month ten years ago versus now. Not nearly as much would that $1,000 buy today as it would back then. To counter this, the Social Security Administration introduces a cost of living adjustment (COLA) almost annually. This is intended to maintain a somewhat steady buying power of Social Security income in the face of inflation.
Social Security Benefits Estimation
To calculate how much benefits will increase, Social Security looks at how much the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) climbed in the third quarter of the preceding year. Recipients should anticipate a 3.2% increase in Social Security benefits in 2024, as that is the COLA. You should anticipate an increase to $1,032 this year if your gross benefit was $1,000 in 2023 before exclusions for stuff like Medicare premiums. The Social Security tax on your income is 12.4%. Employers cover half of that cost for workers, with the remaining half coming out of workers’ salaries. Self-employed individuals are required to pay the full 12.4%.
Social Security Taxes
However, not all income is liable to Social Security taxes. The maximum amount of your annual income that is subject to Social Security taxation is known as the wage base limit. The pay base cap for 2024 is $168,600. The Social Security wage tax does not apply to any earnings over that threshold. The pay base limit is yearly increased for inflation, much like monthly benefits. To put things in perspective, the base pay was $117,000 in 2014 and $160,200 in 2023. Understanding the salary base limit is crucial since, if it rises, your income may remain unchanged, thereby affecting your tax liability. In 2023, if you made $170,000, $9,800 was exempt from Social Security taxes. Of $170,000 in income for this year, $1,400 could be exempt.
