Social Security Updates 2024–2025: 2 Big Changes You Need to Know Beyond the COLA Boost
In 2024, Social Security received a 3.2% Cost-of-Living Adjustment (COLA) to help protect retirees from inflation. But that’s not the only change affecting Social Security recipients and those preparing to retire. The Social Security Administration (SSA) has now introduced two additional important updates that will impact millions of current and future retirees in the U.S.
These changes involve the maximum taxable earnings limit and an update to the Full Retirement Age (FRA). Whether you’ve already retired, are planning to retire soon, or are helping someone understand their benefits, knowing how these rules work can make a big difference.
Let’s break it all down in simple terms.
What Changed in 2024 After the COLA Increase?
First, a quick refresher. The 2024 COLA increased benefits by 3.2%. This means that the average Social Security recipient who was getting around $1,837 per month in 2023 will now receive about $1,896, which is a $59 monthly increase. This adjustment is based on the Consumer Price Index (CPI-W) and is meant to help offset the rising cost of essentials like food, healthcare, and rent.
Now, let’s look at the two new changes announced by the SSA.
1. Increase in Maximum Taxable Earnings for Social Security
The maximum amount of earnings subject to Social Security tax is increasing in 2024—from $160,200 to $168,600. This means that workers earning up to $168,600 will continue to pay Social Security tax on their income. Earnings above this amount will not be taxed for Social Security purposes.
Why does this matter?
If you are still working, this change means you might pay more in Social Security taxes in 2024, especially if you’re a high-income earner.
Here’s how it works:
- Employees pay 6.2% of their wages in Social Security taxes.
- Employers match that with another 6.2%.
- Self-employed individuals must pay the full 12.4% themselves.
Example:
If you earn $175,000 in 2024, you will only pay Social Security taxes on $168,600 of that income. That’s $8,400 more in taxable income compared to the 2023 limit.
What’s the benefit?
While you pay more into the system, this also means your future retirement benefit may be higher, since Social Security benefits are based on your highest 35 years of earnings.
If you’re already retired, this update does not affect you—it only impacts people who are still working and paying into Social Security.
2. Full Retirement Age (FRA) Shift for Those Born in 1959
Your Full Retirement Age (FRA) is the age at which you can collect 100% of your Social Security retirement benefits. In 2024, the FRA for individuals born in 1959 is 66 years and 10 months.
If you were born in:
- 1958, your FRA is 66 and 8 months
- 1959, your FRA is 66 and 10 months
- 1960 or later, your FRA is 67
Why is this important?
If you start receiving Social Security before your FRA (as early as age 62), your monthly benefits will be reduced permanently. But if you wait until your FRA—or even delay benefits until age 70—you’ll get the full amount, or more.
Example:
Say your FRA is 66 years and 10 months, but you decide to start benefits at age 62. Your monthly check could be up to 30% lower than if you waited. On the other hand, if you delay until age 70, you’ll receive around 8% more per year for every year you wait beyond FRA.
Why These Changes Matter
These updates will impact:
- How much working individuals contribute to Social Security in 2024
- When and how much retirees should claim, depending on their age
- How you plan your retirement timeline, especially if you’re nearing FRA
In simple terms, those who are still working may pay a little more into the system, while those planning retirement should pay attention to the FRA changes to avoid benefit reductions or maximize their monthly income.
How to Prepare for These Changes
- Check your earnings history through your My Social Security account (ssa.gov/myaccount)
- Talk to a financial advisor if you’re unsure when to retire
- Use SSA calculators to estimate your benefits based on different retirement ages
- Factor in taxes and medical costs when deciding your retirement year
- Stay updated with SSA announcements for 2025 and beyond
While the 2024 COLA increase offers short-term relief, the increase in the taxable earnings limit and shift in Full Retirement Age have long-term implications for retirement planning. If you’re close to retirement, these changes may impact how much you receive monthly—or how much more you’ll pay while still working.
Take time to review your earnings, consider your age, and decide whether it’s smarter for you to retire early or wait a bit longer for a larger monthly check.
