Here's an analysis of what to expect from Social Security changes for 2024 and how they may affect Grand Villa residents in Grand Junction, CO.
The three main Social Security changes for 2024 are a cost of living (COL) increase, an adjustment in the maximum earnings subject to payroll tax and the retirement earnings test exempt income.
Your Social Security benefits will increase by 3.2% in 2024. This increase is less than what you received in 2023 (8.7% COL), but it reflects the fact that inflation is coming under control. The only other change that may influence your benefit is the increase in Medicare premiums. If you are older than 65 and pay your Medicare Part B premiums from your Social Security benefits, you must pay a Medicare contribution increase of $9.80 per month, making monthly premiums $174.70.
The taxable maximum earnings limit increases to $168,600 for 2024, up from $160,200. All employed people and employers pay a Social Security tax of 6.2% on earnings up to that amount. Self-employed individuals must pay a combined tax of 12.4% on 92.35% of their earnings.
In 2024, the exempt income limit is $22,320 for all people who reach normal retirement age after 2024. This limit affects people who've elected to receive their retirement benefits early, who continue to work and whose income exceeds $22,320. SSA penalizes all affected employees by reducing the Social Security benefit by $1 for each $2 their income exceeds this amount until they reach normal retirement age. Note that the terms Normal Retirement Age (NRA) and Full Retirement Age (FRA) mean the same thing.
You’re entitled to your full Social Security retirement benefits when you reach your FRA. This age is indexed depending on when you were born. If you were born before 1955, your FRA is 66, and if you were born after 1960, your FRA will be 67. While you can retire early at any time after you reach the age of 62, your Social Security benefit is reduced depending on the age you retire at. The difference is significant: You'll receive between 25% and 30% less each month if you retire at 62 instead of at your FRA. The converse is true — if you delay your retirement until you reach 70, your monthly benefit will be approximately 24% greater.
If it’s possible for you to continue working beyond the age of 62, you can significantly increase your monthly SSA benefit by delaying retirement until the latest possible opportunity, up to the age of 70.
Yes — everyone must pay federal tax on their income, irrespective of age or whether they’re retired or not. However, only part of your Social Security benefit is taxable. If you’re an individual, the income limits for tax are:
Similar rules apply to couples filing joint income returns, although the limits are naturally higher.
Colorado is one of the few states that taxes Social Security benefits. Colorado levies a flat rate tax of 4.4% on all income. However, Colorado retirees aged 55 to 64 can deduct up to $20,000 of their Social Security benefits. From the 2022 tax year onward, Colorado residents aged 65 and older don't pay any Colorado state tax on Social Security income.
While many people have a dream of doing nothing in retirement, the reality is that this lifestyle doesn't suit everyone. Many who retired early during the pandemic now want to go back to work. Reasons include the need for intellectual stimulation, emotional fulfillment and a desire to supplement retirement income.
You don't need to work full-time, as there are many ways to work part-time and make a little extra cash. Whatever the reason, if you work after retirement, you should consider how the additional income will affect your Social Security benefits. If your age is less than your Full Retirement Age (66 to 67 years old), any income over the exempt income limit of $22,320 reduces your Social Security benefits. The penalty is severe — for every $100 you earn over $22,320, SSA reduces your monthly benefits by $50. However, it’s not all bad news. The benefits you lose by earning income over the exempt income limit are added back to your monthly benefits once you reach your FRA. Also, this income penalty falls away and you're free to earn as much as you like after reaching your FRA.