Social Security has been around for so many years, you might assume that the rules are set in stone. To be clear, many of the program’s basic rules don’t change on an annual basis.
For example, full retirement age for Social Security is 67 for anyone born in 1960 or later. That’s been the rule for years, and so far, there are no indications that it’s about to change.
The guidelines for imposing taxes on Social Security benefits have also been in place for multiple decades. While the income thresholds related to taxed benefits were established decades ago, they’ve yet to get an update — much to the disappointment of beneficiaries.
But certain aspects of Social Security have recently changed or have the potential to change in the near term. Here are a few you should know about.
1. It’s getting harder to qualify for Social Security
If you put in a decent amount of time in the workforce, then qualifying for Social Security isn’t all that difficult, given that the earnings thresholds are pretty low. But if you’re someone who’s always worked on a part-time basis, then qualifying for benefits may end up being a challenge.
Social Security eligibility hinges on earning 40 work credits in your lifetime at a maximum of four per year. But this year, it takes $1,640 of earnings to attain one Social Security work credit. Last year, it only took $1,510.
Even if you’re not able to qualify for Social Security based on your own earnings history, you may be eligible for benefits in retirement, nonetheless. Social Security pays spousal benefits to people who are or were married to people who are eligible for benefits. But if you’re eager to score a benefit of your own, you’ll need to be mindful of how much income it takes to secure a work credit.
2. More earnings are being taxed for Social Security purposes
Social Security’s primary revenue source is payroll-tax revenue. But workers don’t necessarily pay Social Security tax on all of their earnings. There’s a wage cap that limits how much income can be taxed to fund Social Security.
Last year, the wage cap was $147,000. But in 2023, it’s $160,200. If that sounds like a large leap, you should know that some lawmakers are calling to lift the wage cap altogether. So in that context, having to pay Social Security tax on an extra $13,200 this year doesn’t seem all that bad.
3. Next year’s COLA could be a lot smaller
Each year, Social Security beneficiaries are eligible for a cost-of-living adjustment, or COLA, that’s pegged to inflation. At the start of 2023, Social Security recipients saw their benefits rise 8.7% on the heels of a year of staggering inflation.
But inflation has cooled notably in 2023. And that could set the stage for a much smaller COLA in 2024.
We won’t know what next year’s COLA will look like until October. That’s because it will be based on third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
So far, we know that in July, the CPI-W was up 2.6% on an annual basis. But we don’t have similar data for August or September. For now, the best anyone can do is guess at an exact COLA for 2024. Generally speaking, though, Social Security recipients should gear up for a COLA in the ballpark of 3%.
That might sound like a bad thing. But it’s important to recognize that a slowdown in inflation is a positive development, even if it doesn’t quite boost Social Security checks as much as seniors would like.
It’s easy to assume that there’s never a need to read up on Social Security. But because the program is constantly changing, it’s wise to keep tabs on news as it emerges. This holds true whether you’re currently collecting benefits or are years away from potentially being eligible.