COLA boosts benefits by 3.2%, but Medicare premiums are also going up
Published by: AARP
The cost-of-living adjustment (COLA) gets the headlines, but multiple aspects of Social Security change annually to reflect national trends in prices and wages, affecting the benefits paid to tens of millions of Americans and the taxes paid by nearly all U.S. workers. Here are five important ways Social Security will be different in 2024.
1. COLA benefit boost
Inflation cooled considerably in 2023, but consumer prices still went up, producing a 3.2 percent COLA for Social Security beneficiaries. That will raise the estimated average retirement benefit by $59 a month, from $1,848 to $1,907, starting in January, according to the Social Security Administration (SSA).
2. Medicare premium offset
If you are enrolled in Medicare, chances are you have premiums for Part B — the part of the federal health care program that covers doctor visits and other outpatient treatment — deducted directly from your Social Security payments. That means an increase in Medicare premiums can undercut your cost-of-living adjustment.
3. Social Security taxes
Social Security benefits are primarily funded by a 12.4 percent tax on most workers’ incomes. If you have a job, you pay half of that rate (via FICA withholding from your paycheck) and your employer covers the rest. If you’re self-employed, you pay both shares as part of your annual tax return.
4. Social Security earnings test
If you collect Social Security and continue to work, a portion of your monthly payment may be temporarily withheld. This earnings test applies to people who collect retirement, survivor or family benefits; have not yet reached full retirement age; and have earnings above a certain level.
5. Qualifying for benefits
You become eligible for retirement benefits by collecting Social Security credits, which you get by doing “covered” work — a job or self-employment in which you pay Social Security taxes on your income. In 2024, you get one credit for earnings of $1,730, $90 more than the 2023 level.