The cost-of-living adjustment for 2024 will be 3.2% for more than 71 million Americans who receive Social Security, the Social Security Administration announced Thursday.
Retirees’ monthly payments will therefore rise by an average of about $59 to an estimated average of $1,907, starting in January 2024, which matched recent projections. Increased payments to approximately 7.5 million Supplemental Security Income recipients will begin on December 29, 2023.
The adjustment was significantly lower this year than in recent years due to reduced inflation. Recipients had received increases of 8.7% for 2023 and 5.9% for 2022. The average adjustment over the last 20 years was 2.6%.
The maximum amount of earnings subject to the Social Security tax will also increase to $168,600.
In addition to the COLA, the earnings limit for workers younger than full retirement age will increase to $22,320, and the earnings limit for people reaching their full retirement age in 2024 will increase to $59,520. The SSA deducts $1 from benefits for each $3 earned over $59,520 until the month the worker reaches full retirement age.
There is no limit on earnings for workers who are full retirement age or older for the entire year.
More information about the COLA, tax, benefit and earning amounts for 2024 is available on the SSA website.
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In the modern corporate landscape, employee benefit programs are evolving to address more than just health care and retirement. Companies are increasingly realizing the value of providing comprehensive financial wellness programs that ensure their employees are not only physically and mentally healthy, but also financially secure.
Financial Wellness: An Integral Part of Employee Benefits
Philipp Hecker
Financial wellness programs have evolved from their humble beginnings as supplementary services focused primarily on savings and investment. Today, these programs are vital frameworks designed to encompass every facet of an employee’s financial existence, often weaving in holistic planning that aligns with the unique financial milestones encountered throughout life.
Understanding the intricacies of one’s financial journey is essential. Unlike a blanket approach, the journey to financial wellness involves recognizing employee-specific age points that could either act as risks or open doors to opportunities. These milestones are not mere numbers, but vital markers that guide one’s financial path.
Key Financial Milestones for Employees
Every stage of life comes with unique financial challenges and opportunities. From the birth of a child to the contemplative years nearing retirement, employees encounter various financial junctures. By understanding and anticipating these milestones, individuals can be better equipped to make decisions that align with their long-term goals and aspirations. Here, we highlight some of the pivotal age-specific points that punctuate the financial lifecycle of the average employee:
Birth: A crucial time for parents to set up savings plans, such as 529 plans for education.
14 (Working age): When some teens may start their first jobs and begin to invest (via custodial individual retirement accounts) in tax-advantaged ways for their future.
15-17 (Driving age): Financial implications of getting a driver’s license, insurance and perhaps even a car.
18-21 (Age of majority): When most become financially independent and might start their first full-time job, go to college and/or take out student loans.
26 (Health care milestone): When one can no longer stay on their parents’ health insurance.
50 (Catch-up contributions): The opportunity to make additional tax-advantaged contributions to retirement accounts.
55 (Early withdrawals / HSA catch-up contributions): When some retirement accounts allow for penalty-free withdrawals, and one can make additional contributions to health savings accounts.
59.5 (Retirement withdrawal): Traditional IRAs and 401(k)s offer penalty-free withdrawals.
60 (Social Security for widow or widowers): Widows and widowers can start collecting Social Security benefits.
62 (Earliest Social Security): The earliest, albeit not always best, age to start collecting Social Security benefits.
65 (Medicare): Eligible to begin Medicare coverage.
67 (Social Security FRA): Full retirement age for Social Security for those born in and after 1960.
70 (Social Security latest): The age when individuals must start taking Social Security.
70.5 (QCDs): Age to start utilizing Qualified Charitable Distributions, for those that are philanthropically inclined.
73 (RMDs): Mandatory withdrawal for certain retirement accounts.
Addressing the Knowledge Disparity
Despite the significance of these milestones, an alarming proportion of the workforce lacks awareness. Worryingly, 66% pass on without a will, while some 64% are unfamiliar with educational savings plans like 529s.
Even as employees age, only 16% leverage the catch-up contributions to their retirement accounts upon turning 50. Sadly, this information gap often persists even among those who consult financial advisers: Bento Engine research indicates that 60% do not receive guidance on catch-up contributions, while 40% have little insight into the best time to begin taking Social Security benefits
How Employers and Financial Wellness Providers Can Bridge the Gap
This evident knowledge gap is not just a challenge—it can present an opportunity. For businesses, incorporating a financial wellness program that highlights these age-specific milestones can be transformative. It is not merely about the company’s bottom line; it is a corporate responsibility that can lead to a more contented, loyal, productive and financially secure workforce.
Employees empowered with timely, precise information are positioned to make more informed financial decisions. Imagine the peace of mind when an employee understands the nuances of Social Security benefits, potentially generating an additional $182,000 in lifetime benefits. This knowledge becomes a powerful tool that, when wielded correctly, can bolster financial security.
Moreover, a proactive approach from retirement plan advisers, whereby employees are informed in advance about upcoming financial milestones, can potentially foster a sense of trust and preparedness. They are no longer navigating the complexities of finance alone; they gain access to a structured program and potentially even financial coaches, both of which can guide them along the way.
The Future of Employee Benefits
The evolution of employee benefit programs to integrate financial wellness signifies a seismic shift in how companies view their responsibility towards their workforce. By acknowledging and addressing the knowledge gap, employers working in conjunction with retirement plan sponsors are not just providing another perk; they are affirming their commitment to the holistic well-being of the company’s employees.
In doing so, they are not only enhancing their corporate image, but also fostering a workspace with employees who are empowered, confident and secure in their financial future. The result? A more engaged, loyal and productive workforce.
Philipp Hecker is CEO of Bento Engine, a fintech platform empowering proactive, comprehensive advice at scale.
