What Is Social Security Going to Look Like in 2024. As we approach the end of the year, it crucial to anticipate the scheduled changes in Social Security benefits and Medicare premiums for the coming year. In 2024, more than 66 million Americans will experience a positive change with a 3.2% cost-of-living adjustment, enhancing the average Social Security benefit by over $50 per month.
However, Medicare Part B premiums, covering doctors’ fees and outpatient services, will see an increase of approximately $10 per month, reaching $174.70 per month in 2024.
Impact on Higher-Income Retirees
A silver lining emerges for some higher-income retirees. The income thresholds triggering monthly income-related adjustment amounts (IRMAA surcharges) have increased. This adjustment may spare certain retirees from the Medicare high-income surcharge in 2024, with thresholds rising by $6,000 for single taxpayers and $12,000 for married couples filing jointly.
Income-Related Medicare Premiums
Individuals with a modified adjusted gross income (MAGI) below $103,000 in 2022 and married couples with a MAGI under $206,000 in 2022 will pay the standard Medicare Part B monthly premium in 2024. However, higher-income Medicare enrollees will face additional costs, ranging from around $70 to $420 per month per person, on top of the standard Part B premium.
Long-Term Financing Concerns
While immediate concerns may revolve around monthly cash flow from Social Security income and Medicare premiums, the long-term financial stability of the Social Security program poses a significant worry. The 2023 Social Security Trustees Report forecasts the depletion of the combined Old Age, Survivors, and Disability trust fund in about 10 years. Failure to address this by 2034 could lead to a 20% cut in benefits for current recipients, an immediate 25% increase in Social Security taxes, or a combination of benefit cuts and tax increases.
Public Perception and Advisor Guidance
A crisis of confidence looms as three-quarters of adults aged 50 and older fear Social Security running out of funding during their lifetimes. The reluctance to wait until age 70 to receive maximum benefits is evident, with 40% of non-retired Americans planning to claim Social Security before their full retirement age.
Advisors must address these concerns, emphasizing that even if Congress fails to act, Social Security won’t go bankrupt. Ongoing FICA payroll tax revenue could cover about 80% of promised benefits.
Advisor Recommendations and Future Planning
Financial advisors face the challenge of creating retirement income plans amid uncertain benefit estimates. Advisors should reassure clients that even in the unlikely scenario of trust fund exhaustion, Congress is unlikely to cut benefits drastically.
For younger clients, stress-testing retirement income plans becomes essential. Considering a 20% reduction in Social Security benefits, advisors can guide clients in taking proactive steps to secure their retirement, emphasizing the importance of saving more for the future.
Conclusion
As this column marks its final chapter, the intricate landscape of Social Security and Medicare demands continued attention. The responsibility falls on both policymakers and individuals to navigate the evolving landscape and ensure the longevity of the nation’s bedrock retirement programs.
