Benefits Planner: Retirement Special Earnings Limit Rule

The proportion of men who are insured declined slightly from 1970 to 2020, with 91% fully insured and 79% insured for disability in 2020. By contrast, the proportion of women who are insured increased dramatically—from 63% to 87% fully insured and from 41% to 75% insured for disability. But the Consumer Financial Protection Bureau (CFPB) has generally advised against using some home equity options solely to delay collecting Social Security benefits.

If you’re a worker who hopes to eventually be eligible for retirement benefits, or you’re working and also receiving retirement benefits, here’s what you need to know. SSI benefits are generally paid on the first of the month, but because Jan. 1 is a federal holiday, SSI recipients get their first COLA-boosted payment on the prior business day — in this case, Friday, Dec. 29. Social Security is a significant benefit that helps millions of retirees, disabled individuals, and surviving spouses. The Social Security Administration adjusts benefits each year to keep up with inflation, which often means a bigger payment for recipients.

• Assets increased in 2020 because total income exceeded expenditures for benefit payments and administrative expenses.
• The average Social Security retirement benefit is significantly lower than the maximum.
• Retirees often see some of that extra money eaten up by rising Medicare Part B premiums, which cover doctor visits and outpatient hospital services and are automatically deducted from Social Security checks.

The earnings test is an important factor to consider when deciding whether to claim retirement benefits early, according to Elsasser. The good news is those withheld benefits are applied to your monthly benefits once you reach full retirement age. With the 2024 COLA, the maximum federal payment to an individual SSI recipient will go up from $914 a month to $943. (Most states provide supplemental payments to some SSI beneficiaries.) A married couple in which both spouses are SSI-eligible would receive up to $1,415 a month, up from $1,371 this year. The COLA tracks changes in consumer prices year to year and is applied to benefit amounts. Other measures that chart national trends in wage growth can affect eligibility and payments for SSDI and SSI recipients.

Social Security may affect workers differently in 2024. Here are 3 key things to keep in mind

The federal government sets a limit on how much of your income is subject to the Social Security tax. For 2024, the Social Security tax limit is $168,600 (up from $160,200 in 2023). The maximum amount of Social Security tax an employee will have withheld from their paycheck in 2024 will be $10,453.20 ($168,600 x 6.2%).

To receive the maximum Social Security benefit, you would need to earn at least the maximum wage taxable by Social Security for 35 years and delay claiming the benefit until you reach 70. The earnings cap adjusts every year based on changes to the national average wage index and is $160,200 in 2023, up from $147,000 in 2022. If that same person waits to get benefits until age 70, their monthly benefit increases to $1,253. The larger amount is due to the delayed retirement credits earned for the decision to postpone receiving benefits past FRA. In this example, that higher amount at age 70 is about 77% more than the benefit that they would receive each month if benefits started at age 62—a difference of $545 each month.

These wage thresholds, set by law, do not adjust for inflation and therefore apply to more employees each year. Choose email or text under “Message Center Preferences” to receive courtesy notifications. Homeowners can use this cash for financial planning options, including paying off high-interest debt that may have led them to consider tapping into Social Security benefits early. However, it could be difficult for some to delay collecting Social Security benefits, especially in an uncertain economy and when considering the high costs of health care and potential outstanding debt. “There’s a reason you’re getting a pay bump,” Christian Mills, Reverse Mortgage Funding’s head of financial advisor relations, said. “Because everything costs a lot more and inflation is going up. There’s a big trade-off.”

In addition, your future benefit amount will not increase once your income surpasses the maximum taxable earnings limit. To put it as simply as possible, your Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or “indexed” to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most.

Eligibility requirements and federal payment standards are nationally uniform. SSI replaced the former federal/state adult assistance programs in the 50 states and the District of Columbia. To help people estimate their payments, the SSA released a retirement planner chart. Although Social Security beneficiaries can begin collecting at age 62, they can substantially increase their benefits if they wait until age 70.

Percentage Distribution of Recipients, by Age, 1974–2020

Like retirement benefits, SSDI is paid out of payroll tax revenue that flows into Social Security’s trust funds, and eligibility and benefit amounts are determined by a worker’s earnings record. That means the taxes that today’s workers are paying will help fund current retirees’ benefits, and once you start collecting Social Security, younger workers will be funding your monthly checks. People whose earnings equaled or exceeded Social Security’s maximum taxable income — the amount of your earnings on which you pay Social Security taxes — for at least 35 years of their working lives.

It was $39,600 in 1985, for example, $76,200 in 2000, and $106,800 in 2010. January 2021 marks other changes that will happen based on the increase in the national average wage index. For example, the maximum amount of earnings subject to Social Security payroll tax in 2021 will be higher.

What is the maximum Social Security benefit?

Almost 57% of SSI recipients aged 65 or older received OASDI benefits, as did 28.2% of those aged 18–64 and 6.3% of those under age 18. Other types of unearned income, such as income from assets, were reported most frequently among those under age 18 (21.8%) and those aged 65 or older (10.2%). Social Security is designed to replace a portion of your pre-retirement income. The amount you receive depends on factors such as the date that you begin collecting payments and your earnings level. More beneficiaries may be liable for federal income taxes on their benefit income next April due to the 8.7% cost-of-living adjustment 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.

That can be an effective strategy for any of us to use to beef up our benefits, even if we never get $4,555 per month. But if you’re unable to reach the maximum benefit amount, delaying Social Security is one of the best and easiest ways to boost your benefits. Your Social Security benefit amount is based on your income over the 35 highest-earning years of your career.

Marital Status Could Impact Your Benefits

More than 71 million Americans receiving Social Security benefits will see their checks rise by 3.2 percent next year to help them keep pace with inflation, the Social Security Administration said on Thursday. That’s more than the the importance of bank reconciliation in internal control typical cost-of-living adjustment but a significant drop from the record-setting bump of 8.7 percent in 2023 amid rampant inflation. The federal government increased the Social Security tax limit in eight out of the past 10 years.

It isn’t wise to rely on Social Security to be your only source of income in retirement if you can save more. Many tax-advantaged savings accounts are available to build an additional nest egg. According to the Social Security Administration (SSA), an average of 70.6 million people per month received Social Security benefits, on average, of $1,681 per month in 2022. Benefit recipients received a slightly larger amount of $1,848 in 2023 due to the cost-of-living adjustment. This year, the limit is $142,800 per year, but in 2022, it will increase to $147,000 per year. If your goal is to collect the maximum $2,364 per month at age 62, you’ll need to be reaching these limits consistently throughout your career.

This monetary policy could impact Americans’ debt balances as interest rates rise on various credit products. In addition to near-record inflation, Americans are also struggling with major debt. Household debt rose to $16.15 trillion in the second quarter of 2022, according to The Federal Reserve Bank of New York.

If you have 40 work credits, you are eligible to claim Social Security as early as age 62, but waiting until FRA will result in a much higher benefit. The most that you can receive in 2023 if you start collecting at age 62 is $2,572. For example, if you were born in 1960 or later, your FRA is 67, and if you were born in the 1943–1954 years, it is 66. (But not just 66. For example, for those born in 1956, FRA is 66 and 4 months.). You will receive 100% of your benefits if you wait until your FRA to claim them. If you claim at age 70, vs. at FRA, you get an 8% bonus for each year that you delayed claiming.

Social Security’s annual cost-of-living adjustment (COLA) provides beneficiaries with a hedge against rising prices. That includes all beneficiaries — not just retirees and survivors but also people who receive disability payments. This is especially crucial if Social Security makes up most or all of a household’s income. Under limited circumstances, some individuals may claim a qualifying religious exemption or temporary student exemption. Foreign government employees and nonresident aliens may also not be required to pay Social Security taxes.