The Social Security Administration (SSA) recently announced that the annual cost-of-living adjustment (COLA) for benefits would be 1.3%. Here's a closer look at some of the most significant changes affecting Social Security recipients in 2021.
- Social Security checks will increase slightly. For the average retired worker, the monthly Social Security benefit will rise by $20 to $1,543 in January from $1,523 in 2020. For the average retired couple who both collect benefits, the payment will rise by $33 to $2,596, up from $2,563. The average disabled worker will see monthly benefits increase by $16 to $1,277 from $1,261. The maximum Social Security check for an individual retiring at full retirement age will rise to $3,148 a month in 2021 from $3,011 — an increase of $137.
- Tax Caps Increase. As it does every year, the maximum amount of earnings subject to the payroll tax went up. In 2020, the maximum amount of taxable earnings was capped at $137,700; in 2021, that figure climbed to $142,800. Earnings over that amount aren't subject to Social Security taxes.
- Medicare Increase is Minimal. The Medicare Part B premium increase for 2021 isn't as significant as government actuaries predicted. To offset the 2020 emergency spending and avoid a large premium increase, Congress subsidized Medicare making the Part B premium increase an estimated $4 per month.
- Social Security Limits Increase. Beneficiaries under full retirement age have $1 in benefits held back for every $2 they earn from working above $18,960 a year ($1,580 a month). In the year you hit full retirement age, the earnings test limit leaps to $50,520 a year ($4,210 a month), and SSA holds back $1 for every $3 you earn. The month you reach full retirement age, Social Security stops holding money back.
Change is an everyday occurrence and knowing how economic decisions affect your financial well-being is probably top of mind for you. We know it's hard to keep up with the changes, so we're here to help you. Call us today, and let's make sure your investments are changing in a good way for you.
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[1] https://www.aarp.org/retirement/social-security/info-2020/biggest-social-security-changes-for-2021.html