The Social Security Disability Insurance (SSDI) program first became available in 1956 and has since undergone numerous changes and challenges. Even today, both existing and potential SSDI beneficiaries wonder what the future of the program looks like.
Unfortunately, the current SSDI landscape holds many challenges in the form of depleting funds and an aging population. Nonetheless, the immediate changes for SSDI beneficiaries are primarily positive, with a higher average benefit amount for 2024 and a higher Substantial Gainful Activity (SGA) limit.
This article talks in more detail about the 2024 changes and challenges that SSDI is going to go through.
How SSDI Works
The Social Security program is supported by the Federal Insurance Contributions Act (FICA), a specialized payroll tax. Social Security taxes comprise 12.4% of wages, with a taxable annual income limit of $160,200 established for 2023 and $168,600 for 2024. Taxes are paid in equal parts by employers and employees.
Self-employed individuals are required to pay the full 12.4%, but they are permitted to deduct half of that amount as an above-the-line adjustment to income from their taxable income. These taxes are deposited into Social Security trust funds, which are used to provide payments. Any surplus is invested in US government debt.
Your contributions to the Social Security system in the form of payroll taxes are not set aside to be used for the payment of benefits whenever you become eligible for them.
They go toward paying out existing recipients or into the system’s surplus. This means that members’ future benefits are not tied to their contributions but rather to the overall viability of the Social Security system.
SSDI: Upcoming Changes
Every year, the SSDI program implements significant changes to adjust for inflation and other factors. Following are some of the changes that the SSDI program will implement in 2024.
COLA Increase
In 2024, the cost-of-living adjustment (COLA) will be 3.2%, which is roughly 67% lower than 2023’s adjustment but higher than the average of 2.6% for the previous two decades. All SSDI beneficiaries will be affected by this change, although the degree of impact will vary based on the date they filed their claim.
Higher Taxes
In 2024, the maximum amount of earnings that are subject to the Social Security payroll tax will increase to $168,600, up from $160,200 in 2023. This change will mainly affect individuals who earn high incomes.
FICA taxes are deducted from workers’ paychecks at a rate of 7.65%, with 6.2% of that amount going to Social Security. Approximately 6% of workers who are required to pay Social Security taxes have annual incomes that exceed the taxable limit.
Higher Benefit Amount
The highest amount of Social Security benefits that a worker can receive upon approval for SSDI will increase from $3,627 in 2023 to $3,822 in 2024.
Higher Disability and Spousal Benefits
According to the Social Security Administration, the following changes will be implemented concerning spousal benefits:
- The average monthly benefit for widowed women with at least two children will rise to $3,653 in 2024, up from $3,540 in 2023.
- The average monthly benefit for elderly widows and widowers living alone will increase from $1,718 to $1,773.
- The average monthly benefit for a disabled worker who is married and has one or more children will increase to $2,720 over the previous amount of $2,636.
Higher SGA Limit
In 2024, recipients of Social Security Disability Insurance will be permitted to earn up to $1,550 per month from employment without putting their benefits at risk. This is an increase from the previous limit of $1,470 per month in 2023.
For blind recipients, the limit is higher; they can earn $2,590 per month.
The same holds true for the Social Security Administration’s work incentives, which encourage people receiving SSDI to look for employment. Trial periods are among the most common types of incentives for workers.
Beneficiaries can use it to evaluate their working capacity for nine months without jeopardizing their eligibility. During this time, recipients will get their full benefits, no matter how much money they make.
If your gross earnings in any month during your trial work period exceed a certain amount, that month will be counted as one of your nine trial work period months. This amount will rise from $1,050 in 2023 to $1,110 in 2024. If you earn less than this amount, the month will not count towards your trial work period.
Emerging Challenges Facing SSDI
Unfortunately, the SSDI program faces many future challenges, hinting at the need for urgent reforms. In this section, we will discuss some of these challenges.
Greater Participation in the Program
Between 1970 and 2010, the percentage of people aged 25 to 64 who received Social Security Disability Insurance benefits increased from 1.6% to 5%.
This has placed a greater strain on the Social Security system in the form of an increased number of beneficiaries. Let us look at some of the factors contributing to this increase in SSDI claimants.
Female Workforce
One major factor contributing to the increase in SSDI claimants is the fact that a larger number of women became eligible for benefits as they continued to work for longer durations. In the past, few women had worked enough quarters in jobs that were eligible for Social Security.
From 1970 to 2010, the number of women who received Social Security Disability Insurance increased by a factor of five. The percentage of men drawing SSDI doubled.
Aging Population
The baby boomers are shifting into age categories that have higher disability rates, which has increased the overall rate of people receiving Social Security Disability Insurance.
The percentage eligible for Social Security Disability Insurance benefits approximately doubles when individuals move from the age of 40 to the age of 50, and it roughly doubles again as individuals move from the age of 50 to the age of 60.
Smaller Workforce
The massive Baby Boomer population, which includes people born between 1946 and 1964, is retiring at an unprecedented rate, which is further reducing the workforce participation rate. According to the United States Census Bureau, 17 percent of the population was 65 or older in 2020. By 2060, that percentage is projected to reach 24%. By 2060, just 57% of the population will be of working age, down from 62% in 2020.
Depleting Funds
By the year 2035, the proportion of workers who pay Social Security taxes per beneficiary will have decreased from 2.8 in 2021 to 2.3.
According to the 2023 report from the Social Security and Medicare Boards of Trustees, the trust fund for Social Security will be entirely depleted in 2033, which is one year earlier than the 2022 projection.
Additionally, the report projected that the Hospital Insurance (HI) Trust Fund, which provides funding for Medicare Part A, would be completely exhausted in 2031, which is three years later than the 2022 projection.
Conclusion
So, amid fund depletion and an increasing number of beneficiaries, the future of the SSDI program is uncertain. However, the provision of benefits is guaranteed so long as employees contribute to the system through payroll taxes.
