Phil Moeller: 2024 Medicare Updates and More

On Jan 20, 2024

TL/DR –

In 2024, changes will affect major components of the American financial system including Medicare, Social Security, retirement accounts, and tax brackets. Medicare Part B monthly premiums will rise to $174.70, an increase of 6% from 2023, while the deductible for Part A will increase 2% to $1,632 and the maximum deductible for Part D drug plans will rise to $545, with an $8,000 out-of-pocket expense cap. Social Security benefits will increase by 3.2%, the contribution limit for 401(k) plans will rise to $23,000 and the standard deduction for married couples filing jointly will increase to $29,200, among other tax bracket adjustments.

Welcome to the New Year’s overview of key changes in 2024 to Medicare, Social Security, retirement accounts, and tax brackets. The alterations will affect nearly everyone in one way or another.

Medicare

Medicare Part B monthly premiums will increase to $174.70 in 2024, a rise of 6% from 2023. The annual Part B deductible will grow by 6.2% to $240. Part B covers doctors, medical equipment, and outpatient expenses.

Part A’s deductible will rise 2% to $1,632 in 2024, with a similar increase for coinsurance programs for care in hospitals and nursing homes.

High-income Medicare surcharges, affecting 8% of high-earning Medicare enrollees, are set to increase roughly 6%.

The maximum deductible for Part D drug plans will rise to $545. Beneficiaries pay 25% of drug costs, continuing until expenses reach $8,000, an increase from $7,400 in 2023. The Inflation Reduction Act eliminates the Part D plans’ catastrophic zone in 2024, ending co-pays for drugs after the $8,000 threshold.

From 2025, the law will cap consumer drug costs at $2,000 and penalize drug makers who increase prices above general consumer inflation.

Social Security

The Social Security cost-of-living adjustment (COLA) will boost 2024 benefits by 3.2%, raising the average monthly benefit to $1,907. The ceiling on earnings subject to payroll taxes will rise to $168,600. Further changes linked to the COLA are explained here (pdf).

Retirement accounts

Eligible individuals can contribute up to $23,000 to their 401(k) plans in 2024, up from $22,500 in 2023. The limit on annual contributions to an IRA is raised to $7,000. The IRA catch‑up contribution limit for individuals aged 50 and over remains $1,000 for 2024. Roth IRA income limits for eligible contributions are now $146,000 to $161,000 for singles, and $230,000 to $240,000 for married couples filing jointly. View further details (pdf) from the IRS.

Taxes

Find here the IRS details on inflation-related changes in deductions and tax brackets. The standard deduction for married couples filing jointly will rise to $29,200 for tax year 2024. For single taxpayers, it will be $14,600, and for heads of households, it will be $21,900.

The 2024 tax brackets are:

37% for individual single taxpayers with incomes over $609,350 ($731,200 for married couples filing jointly)
35% for incomes over $243,725 ($487,450 for married couples filing jointly)
32% for incomes over $191,950 ($383,900 for married couples filing jointly)
24% for incomes over $100,525 ($201,050 for married couples filing jointly)
22% for incomes over $47,150 ($94,300 for married couples filing jointly)
12% for incomes over $11,600 ($23,200 for married couples filing jointly)
10% for single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly)

The Alternative Minimum Tax (AMT) exemption amount for tax year 2024 is $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly, phasing out at $1,218,700).

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