There were several significant changes to Social Security this year. Here’s what you might have missed.
Although Social Security has been around for decades, the program’s rules often change to adapt to current needs. This is generally positive, as updates to Social Security can greatly benefit retirees.
However, not all changes are beneficial. Here are three ways the program shifted in 2024, for better or worse.
Benefits received a 3.2% increase
Each year, Social Security benefits are adjusted for inflation through a cost-of-living adjustment (COLA). The goal of COLAs is to help Social Security recipients maintain their purchasing power as inflation drives up living costs.
In 2024, Social Security benefits saw a 3.2% COLA, raising the average monthly benefit from $1,848 at the end of 2023 to $1,907 at the start of 2024.
However, the COLA for 2025 is expected to be smaller. While it’s too early to know the exact figure—since COLAs are based on third-quarter inflation data—early estimates suggest a 2.57% COLA for 2025, which is significantly lower than the increase seniors received this year.
The silver lining of smaller COLAs is that they indicate cooling inflation. So, while Social Security benefits may not increase as much in 2025, retirees could see a slower rise in their expenses compared to recent years.
The earnings-test limit increased
Once you reach full retirement age, Social Security’s earnings-test limit no longer applies. However, if you’re working while receiving benefits before reaching full retirement age, this limit dictates how much you can earn before some of your Social Security benefits might be withheld.
In 2023, the earnings-test limit for those under full retirement age was $21,240. This year, it increased to $22,320.
For seniors who haven’t yet reached full retirement age but will later in the year, a different, higher limit applies. In 2023, that limit was $56,520, and it rose to $59,520 in 2024.
Exceeding the earnings-test limit can result in some benefits being withheld, but these benefits are not lost permanently. They are added back into your Social Security payments once you reach full retirement age.
The wage cap went up
Higher earners are not subject to Social Security taxes on all their income, as there’s a cap on the amount of wages taxed to fund the program.
In 2023, the wage cap was $160,200. This year, it increased to $168,600. Many Americans won’t be affected by this, as they pay Social Security taxes on their entire salary due to it being below the cap. However, high earners should be prepared for this cap to likely increase again in 2025.
Clearly, there have been significant changes to Social Security since the beginning of 2024. More major changes are likely in 2025 as well. It’s important for both retirees and workers to stay informed about Social Security updates to avoid any unwelcome surprises.
