How changes in Social Security, Medicare, taxes, and more will affect your finances
Published by: AARP
Year-to-year changes in areas key to retiree life — Social Security benefits, Medicare premiums, tax and savings policies geared for older adults — can greatly impact that balance, especially as they interact with economic shifts such as higher inflation or a market downturn. Here are seven things to know about your retirement money for the coming year.
1. Social Security payments
Social Security recipients will see their monthly payments rise 3.2 percent as the 2024 cost-of-living adjustment (COLA) kicks in. The estimated average retirement benefit will increase by $59 a month, from $1,848 to $1,907.
2. Medicare costs
After coming down by 3 percent in 2023, standard premiums for Medicare Part B are going back up in 2024, from $164.90 to $174.70 per month, a 6 percent increase.
Most Medicare enrollees have their premium payments for Part B, the portion of original Medicare that covers doctor visits and other outpatient treatment, deducted directly from their Social Security payments. For this group, the premium increase takes a $9.80-a-month bite out of the COLA benefit boost.
3. Retirement plan contributions
If you are 50 or older, you can put up to $8,000 into an individual retirement account (IRA) for the 2024 tax year. That includes the $1,000 catch-up contribution available to older savers. The cap for people under 50 is $7,000. In both cases, the contribution limit has been bumped up by $500 from 2023. (By the way, you can still make your contributions for the 2023 tax year — the deadline is April 15, 2024.)
4. RMDs
Required minimum distributions (RMDs) are a fact of later life for holders of most types of retirement savings accounts. (The notable exception is Roth IRAs, which are not subject to annual required withdrawals while the owner is alive. Starting with the 2024 tax year, this exception will also apply to Roth 401(k) and 403(b) accounts.)
5. Standard tax deduction
Most taxpayers take the standard deduction rather than itemizing on their tax returns. For the 2023 tax returns they must file by April 15, 2024, married couples in that majority can take $27,700 off their taxable income, up from $25,900 the year before. For individual taxpayers (single or married filing separately), the standard deduction increases from $12,950 to $13,850. Those filing as a head of household can deduct $20,800, up from $19,400 the previous year.
6. Full retirement age
Congress voted in 1983 to gradually raise the Social Security full retirement age (FRA) from 65 to 67. Four decades on, the change is nearly complete, with FRA reaching 66 and 8 months in the latter half of 2024.
7. Social Security earnings test
If you claim Social Security retirement benefits before reaching FRA and continue to do paying work, your benefits may be temporarily reduced. That depends on whether your annual working income exceeds a set limit called the earnings test.