In 2024, Social Security underwent key changes impacting retirement age, income tax, and earnings limits. These amendments reflect a response to longer life expectancies and the need for strategic financial planning.
The full retirement age has increased from 67 to 70, and there has been a considerable uplift in the limit on earnings subject to Social Security tax, from $142,800 to a possible $200,000. This primarily affects high-income earners. A larger part of Social Security benefits is now taxable to bolster the national program’s budget.
These changes require a fresh approach to retirement planning for current and future retirees, given the shift in full retirement age and the tax rules.
For those turning 66 in 2024, their Full Retirement Age (FRA) is now 66 and eight months. By 2026, the FRA would be 67. This gradual increase addresses the rising life expectancy and the need for the Social Security system to remain solvent. It means that some individuals may need to work longer or accept lower retirement benefits.
Another change concerns the earnings limits for retirees who continue to work whilst receiving Social Security benefits. The earnings limit before affecting the benefit amount has raised slightly, providing more flexibility for individuals balancing work and retirement.
In 2024, individuals not yet at their Full Retirement Age can earn up to $22,320 before it affects their benefits. Additionally, the income cap for Social Security taxes has increased from $160,200 to $168,600, causing higher income earners to contribute more.
These changes reflect government efforts to update the Social Security program in line with economic complexities and changes. As a result, these changes may prompt individuals to reassess their retirement and financial strategies or seek professional advice. Understanding these changes are vital to making informed decisions about retirement planning.
