09 Nov 2023 2024 Contribution Amounts, Tax Bracket Changes, and Social Security Increases
Each year around this time the IRS announces contribution limit and tax bracket increases for the upcoming year. The Social Security Administration does the same, notifying recipients what change in benefits they can expect.
You may remember that all of the above–contribution amounts, tax brackets and Social Security benefits–shot up in 2023: Social Security increased by 8.7%, tax brackets increased by more than 7%, and 401(k) contribution amounts grew by nearly 10%. Each is indexed to inflation, which roared through the global economy last year in a way we haven’t seen since the early 1970’s through the early 1980’s.
Here’s what’s coming next year.
Social Security Cost of Living Increase (COLA)
The COLA for 2024 will be 3.2%, down from 8.7% in 2023. Citizens who qualify for benefits and are between their full retirement age and 70, and who aren’t yet receiving benefits, will get the COLA plus delayed retirement credits (DRC) of 8%.
For those still working, the amount of income subject to the 6.2% Social Security tax paid via payroll deduction, will rise from $160,200 to $168,600.
2024 Tax Brackets
While 2024 brackets are not yet finalized, Bloomberg Tax prepares a special annual report creatively titled, “Projected U.S. Tax Rates.” Their track record is pretty good, though reading it is a special form of punishment. Thankfully, Aimee Pichi with CBS News MoneyWatch has compiled the data in easy to read charts:
In summary, tax brackets are projected to rise by approximately 5%, down from 7% in 2023.
The standard deduction for a single filer projects to be $14,600, or $29,200 for married couples filing jointly.
Retirement Plan Contribution Amounts
The table below, courtesy of the White Coat Investor, displays new contribution limits for various retirement and tax-advantaged accounts. Be mindful that there are eligibility rules you must meet to contribute to these accounts, so reach out to us with any questions.
Last year in a similarly titled brief I wrote that higher Social Security benefits, larger tax brackets (which result in a lower tax liability), and bigger retirement plan contributions were the “silver linings to the high inflation coursing through the global economy.” This year, it’s the flip. The year-over-year change to all three is less, but that’s due to moderating inflation, a huge positive for the global economy.
As always, please reach out to us with questions and have a great weekend!
The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.