These key factors affect how much Social Security income retirees will receive in 2024
- Retirees can expect to see a Social Security cost-of-living adjustment starting this month.
- Other factors may also influence how much benefit income they receive in 2024.
If you're a retiree who relies on Social Security benefits for income, you will see some changes in 2024.
You will get a benefit boost to adjust for inflation. But just how much extra money you see will depend on the size of your Medicare Part B premiums and any money for taxes withheld from your check.
Here are four factors that will influence how much Social Security benefits you receive in the new year.
1. You will get a 3.2% cost-of-living adjustment
Social Security benefits will go up 3.2% starting in January due to an annual cost-of-living adjustment.
That will amount to an increase of more than $50 per month on average for retirement benefits, according to the Social Security Administration.
The increase is much lower than the 8.7% COLA that went into effect in 2023. That prompted a benefit boost of more than $140 per month on average, the Social Security Administration said when that increase was announced.
The maximum benefit for a retired worker who claims at full retirement age will go up to $3,822 per month in 2024, up from $3,627 per month in 2023.
The average benefit for all retired workers will be $1,907 in 2024, up from $1,848 in 2023, according to the Social Security Administration.
2. Your Medicare Part B premiums will be higher
One factor that will affect exactly how much beneficiaries receive is their Medicare Part B premium, which is typically deducted directly from Social Security checks.
Medicare Part B serves as medical insurance and covers doctor and other provider services, outpatient care, home health care, durable medical equipment and some preventive services.
Standard monthly premiums are slated to rise by $9.80 per month to $174.70 in 2024, from $164.90 per month in 2023.
However, people with higher incomes will pay more as a result of what is called income-related monthly adjustment amounts, or IRMAA.
You generally can't have your Medicare Part B premiums adjusted, with one exception, according to certified financial planner Tim Steffen, director of advanced planning at financial services company Baird.
"If something has materially changed in your situation … you can appeal your Medicare premium," Steffen said.
That applies to events that have caused your income to go down since 2022, such as a divorce, the death of a spouse, the loss of a pension or starting retirement.
3. You may face an earnings test
If you claim Social Security between age 62 and your full retirement age, your benefits will be reduced for starting early. If you also continue to work, you may be subject to what is known as the retirement earnings test if you earn over a certain threshold.
In 2024, the earnings exempt from the retirement earnings test will go up to $22,320, from $21,240 in 2023. For every $2 in earnings above that limit, $1 in benefits will be withheld.
The good news is those withheld benefits are applied to your monthly benefits once you reach full retirement age.
Importantly, there is a different earnings test threshold for the year you turn full retirement age.
In 2024, this will go up to $59,520 for the months before you reach your full retirement age, compared to $56,520 in 2023. In the year you turn full retirement age, $1 in benefits is withheld for every $3 in earnings above the limit.
The earnings test is an important factor to consider when deciding whether to claim retirement benefits early, according to Joe Elsasser, a CFP and president of Covisum, a provider of Social Security claiming software.
The new higher threshold — almost $60,000 — for the year you turn full retirement age also presents an opportunity, he said.
For example, if you turn full retirement age in July, you may earn about $10,000 per month prior to your birthday and not be subject to the earnings test if you start benefits Jan. 1, Elsasser said.
4. You may pay taxes on your benefit income
Social Security benefit income may be subject to federal taxes.
The rate at which that income is taxed is based on your combined income. That is calculated by adding half your benefits with your adjusted gross income and nontaxable interest.
You may pay taxes on up to 50% of your benefits if your combined income is between $25,000 and $34,000 for individual tax filers, or between $32,000 and $44,000 for couples who are married and file jointly.
Up to 85% of your benefits may be taxable if your individual combined income is more than $34,000 and you file individually, or if you're married with more than $44,000.
Notably, these thresholds do not change from year to year. However, as benefit income increases each year with COLA, more of that becomes subject to taxes over time.
More beneficiaries may be liable for federal income taxes on their benefit income this tax season due to the 8.7% COLA for 2023, according to research from The Senior Citizens League. The nonpartisan senior group is advocating for the tax thresholds to be updated and annually adjusted so seniors do not have to pay as much taxes on their benefit income.
"Certainly, taxation has become a growing concern," said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
To avoid a big bill at tax time, retirees may opt to have money withheld from their monthly checks.
How will the 3.2% Social Security cost-of-living adjustment for 2024 affect you? If you would be willing to speak on the record for a story, email lorie.konish@nbcuni.com.
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