Retirement Changes in Medicare, Social Security, and Savings Rates for 2021

Changes in 2021

It has been a busy year when it comes to updates and changes concerning your money. In addition to working on personal investment strategies that help our clients’ financial plans, we’ve had the SECURE Act and the CARES Act that have given us opportunities to talk about Roth IRA conversions and RMD strategies. With low interest rates and corporate earnings slowly improving as we leave the year 2020 behind, here are a few additional updates as we begin a new year in 2021.


Medicare Part B premiums will increase by about $4 per month next year and high-income surcharges will also rise modestly in 2021. The standard Medicare Part B premium, which covers doctor’s visits and other outpatient services, will increase to $148.50 per month in 2021, up $3.90 from this year’s monthly premium of $144.60.

Higher-income Medicare beneficiaries will pay more. In 2021, individuals with a modified adjusted gross income of $88,000 or more and married couples with MAGIs of $176,000 or more will pay additional surcharges ranging from $59.40 per month to $356.40 per month on top of the standard Part B premium. Married couples where both spouses are enrolled in Medicare will pay twice as much.

High-income surcharges for 2021, officially known as income-related monthly adjustment amounts or IRMAA, are based on income reported on 2019 federal tax returns. Income brackets that trigger IRMAA surcharges will increase slightly in 2021 as a result of inflation adjustments.

The $3.90 increase in the monthly Part B premium for 2021 is much less than had been expected earlier this year when Medicare spending soared due to the COVID-19 pandemic. But Congress stepped in with emergency spending legislation to offset a rise in the premium that CMS actuaries projected could have been as much as $50 per month for some beneficiaries in 2021.

High-income retirees are also subject to monthly surcharges on their Medicare prescription drug plans, ranging from an extra $12.30 per month per person to an extra $77.10 per month per person on top of their monthly premium. Medicare drug plans are run by private insurers and costs vary widely.

At the top end of the sliding income scale, the wealthiest retirees — singles with $500,000 of income or more and couples with $750,000 of income or more — will face total premiums of $504.90 a month per person, including a $356.40 surcharge, in 2021. That comes to $12,117.60 a year for a married couple.

Social Security

The Social Security Administration announced a 1.3% cost-of-living adjustment for 2021, one of the smallest COLAs on record. SSA said the average Social Security benefit for a retired worker will rise by $20 a month to $1,543 in 2021, while the average benefit for a retired couple will grow from $33 a month to $2,596. The higher Medicare Part B premium will reduce retirees’ net monthly Social Security payments.

IRA and 401(k) Plan Savings Rates

For anyone saving for retirement with a traditional or Roth IRA, the 2021 limit on annual contributions to their IRA account remains unchanged at $6,000. That’s the same amount as it was for both 2019 and 2020. The additional IRA “catch-up” contribution for people 50 and over is not subject to an annual cost-of-living adjustment and stays at $1,000, too (for a total contribution limit of $7,000 for IRA savers age 50 and older).

In 2021, employees who are saving for retirement through 401(k)s, 403(b)s, most 457 plans, and the federal government’s Thrift Savings Plan can contribute up to $19,500 to those plans during the year. That’s the same contribution limit in place for 2020.

The “catch-up” contribution limit for employees age 50 or older who participate in these plans also holds steady in 2021 at $6,500 (for a total contribution limit of $26,000 for employees 50 and older).

California Proposition 19 Changes

If you live in California and are ready to move somewhere else in California, make sure you read last month’s blog, proposition 19, and what downsizing means to you. No matter where 2021 may take you, we wish you a healthy and prosperous new year with family and friends.


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