One of the few benefits of inflation is the increase in the Cost-of-Living Adjustment (COLA) that is used to calculate our social security benefit payments. For 2023, we had a huge increase of 8.7%, which was the highest increase in benefits since 1981.
For 2024, our pay raise is not going to be as good, but benefits are still going to go up by 3.2%, which is better than nothing. This means that benefit payments will increase by more than $50 per month, on average, according to the Social Security Administration.
Of course, someone has to pay for these benefits and that’s everyone who is still working. The government pulls the funding for social security out of our paychecks, and you should see it on your pay stub on the line item that’s labeled as FICA Social Security tax, OASDI tax, or something similar. It is a 6.2% tax (12.4% if self-employed) up to a certain amount of your pay. In 2023, the maximum amount of your pay subject to this deduction is $160,200.
In 2024, the maximum amount of earnings subject to the Social Security tax will increase to $168,600.
Please comment or send an email if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
