The Social Security payments are set to be boosted for over 66 million Americans. The positive news emerges as a 3.2% cost-of-living adjustment (COLA) kicks in, offering more than 66 million Americans a welcome income boost in the coming year.
This adjustment translates to an average monthly increase of over $50 in Social Security benefits, providing relief to retirees nationwide. Medicare Part B premiums, responsible for covering doctors’ fees and outpatient services, will see a modest uptick of approximately $10 per month in 2024. Despite this increase, the net benefits for most Social Security recipients will be higher compared to the preceding year.
Relief for Higher-Income Retirees Coming in 2024
Certain higher-income retirees may find respite from the looming Medicare high-income surcharge in 2024. The income thresholds triggering income-related adjustment amounts (IRMAA surcharges) have expanded, potentially sparing some retirees from additional financial burdens.
Individuals with a modified adjusted gross income (MAGI) below $103,000 (single) and $206,000 (married couples) in 2022 will pay the standard Medicare Part B premium in 2024. Beyond these thresholds, higher-income Medicare enrollees will face varying additional costs, emphasizing the importance of strategic financial planning.
Social Security’s Long-Term Financial Concerns
While immediate cash flow considerations are paramount, the broader issue of Social Security’s long-term financial health looms large. The 2023 Social Security Trustees Report projects the depletion of the Old Age, Survivors, and Disability trust fund within a decade, urging timely congressional action to avert a potential 20% cut in benefits by 2034.
The public’s anxiety about Social Security’s future is palpable, with three-quarters of adults aged 50 and older expressing concerns about fund depletion during their lifetimes. The lack of confidence in congressional action is evident, posing a potential crisis for this vital retirement system.
Financial advisors grapple with uncertainties in estimating future benefits for their clients, given the potential instability in the Social Security system. However, it’s crucial to reassure clients that even in a worst-case scenario, Social Security is not likely to go bankrupt, with ongoing FICA payroll tax revenue expected to cover approximately 80% of promised benefits.
Advisors are encouraged to stress-test retirement income plans, especially for younger clients. Considering a hypothetical 20% reduction in Social Security benefits, advisors can help clients assess the resilience of their overall retirement plans and implement proactive steps to bolster their financial security.
According to the 2023 Nationwide Retirement Institute survey, three-quarters of individuals aged 50 and above express concern about the depletion of Social Security funding within their lifetimes. In a parallel study, the 2023 Schroders US Retirement Survey reveals that a mere 10% of non-retired Americans intend to wait until the age of 70 to avail themselves of their full Social Security benefits. Conversely, a significant 40% of non-retired Americans plan to initiate their Social Security claims before reaching their full retirement age, resulting in a permanent reduction of benefits throughout their lives.