Key Social Security Changes in January 2024: COLA and Tax Adjustments Explained. As we approach the end of 2023, significant changes are on the horizon for United States retirees who rely on Social Security benefits. In January 2024, the Social Security Administration (SSA) will implement two crucial changes that will impact retirees. This article explores these major Social Security alterations set to take effect in the coming year.
Increase in Monthly Checks Through COLA
One of the most immediate changes to Social Security in 2024 revolves around the Cost of Living Adjustment (COLA). This adjustment, based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), is poised to increase monthly Social Security payments. The extent of this increase is contingent on the annual CPI-W fluctuation, which can result in varying adjustments.
COLA and Its Benefits
Retirees will gain insight into the exact percentage increase in COLA benefits during October of the preceding year, which will then take effect in January 2024. This adjustment aims to help retirees mitigate the financial impact of rising prices. It’s important to note that all COLAs are calculated based on inflation data from the third quarter of the current year, encompassing July through September. Projections for 2024 suggest a potential increase of up to 3% to 3.2% at most.
Social Security Payroll Tax Changes
The second significant change slated for 2024 pertains to the Social Security payroll tax. Contrary to the common misconception that all earnings are subject to this tax, only a portion is taxable, subject to an annual cap. In 2023, this cap stands at $160,200, and it is adjusted in alignment with the national average wage index, resulting in incremental increases.
Taxes and Social Security
Simultaneously with the release of the 2024 COLA adjustments, the SSA will unveil the specific maximum taxable earnings limit for the upcoming year. Projections from the Board of Trustees indicate an estimated cap of $167,700. This adjustment will affect the portion of earnings subject to Social Security payroll taxes, potentially impacting the financial dynamics for workers and retirees alike.
The beginning of 2024 will usher in significant changes in Social Security, primarily centered around the COLA adjustments and the annual maximum taxable earnings limit. Retirees and workers alike should stay informed about these changes to effectively plan for their financial future