The Social Security system is one of America’s main governmental and nationwide initiatives, boasting a legacy of longevity and significance. It remains a dynamic institution, always adjusting to align with the ever-shifting scenery of the national and local economies in every state. The continuous evolution of Social Security underscores the necessity for an ongoing understanding, challenging the notion that a mere grasp of the program’s fundamentals suffices.
Some of these changes might not affect you at all, but others do, and that’s why you should always keep an eye out for announcements from the Social Security Administration (SSA), which just made an announcement regarding taxes on retirements that you need to know.
Social Security, Cost of Living and Taxes: Changes in 2024
In 2024, the Cost of Living Adjustment (COLA) is set to go up by 3.2%, which is lower than this year’s increase but still higher than the average over the past twenty years (2.6%). This impacts everyone getting Social Security, but the actual change depends on factors like the type of benefits you get and when you started getting them.
Experts predict that the 3.2% boost will mean an extra $59 each month for retirees on Social Security. If you’re on Long-Term Disability (LTD), you can expect about a $48 monthly increase on average. So, while it’s not as much as before, there’s still a noticeable bump for Social Security recipients coming up in 2024.
Next year, the most money you can earn without paying extra Social Security taxes is going up. In 2023, it was $160,200, but in 2024, it’s going to be $168,600. This means if you make more than this amount, you’ll have to pay extra taxes on the extra money. Normally, people pay 6.2 percent in taxes on their income, but only up to this limit.
Because salaries in the U.S. have gone up on average, they’re increasing this limit. So, if you earn more than $168,600, get ready to see a bit more taken out of your paycheck for Social Security taxes in 2024.
Taxes on Social Security Retirements: States That Don’t Apply Them
Several states in the U.S. stand out for not imposing state income taxes on Social Security benefits. As of my last knowledge update in January 2022, these states include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. In these states, retirees can enjoy their Social Security income without worrying about state-level taxation, providing a potential financial benefit for seniors.
Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not levy any state income tax, while Tennessee imposes taxes on income from dividends and interest but exempts Social Security. It’s important to note that tax laws can change, so individuals should verify the current tax policies in each state, especially if planning a relocation for retirement. Choosing a state without state income tax on Social Security can contribute to a more tax-friendly retirement strategy for seniors.