The Social Security Administration (SSA) has published upcoming changes to social security that will take effect on January 1 of the next year. It always good practice to create what is known as a “my Social Security” account with the SSA (click here). Having an account allows you to check your social security statement, verify your earnings as reported, estimate your future benefits, change your address, and more.
Changes Coming:
- First there will be a 1.3 percent cost-of-living adjustment (COLA) increase to monthly benefits. This means the average social security recipient will receive an additional 20 dollars per month. This adjustment is designed to keep pace with inflation based on the CPI-W provided by the Bureau of Labor Statistics. The increase matches the same amount as the CPI-W if it increases more than .1 percent year to year between last years, and this year’s third quarter. In 2019 the increase was 2.8 percent and 2020 was 1.6 percent.
- The maximum taxable earnings cap rose from 137,700 dollars to 142,800 dollars. The rate of the social security tax employees (matched by employers) pay remains at 6.2 percent. Self-employed tax rate twice this or 12.4 percent. As the taxable cap increases, so does the SSA’s maximum earnings amount to calculate retirement benefits.
- The age of full retirement continues to rise. The earliest you can take your benefits is age 62 with a reduced payout. In 2021, if you turn 62, your full retirement age will be age 66 and ten months. Unless there are changes to the current law, anyone born in 1960 or later will reach full retirement age at 67. Benefit increases continue until the age of 70, at which point there is no incentive to delay receiving your social security benefit.
- There is a 720 dollar increase in 2021 to the amount of money working social security recipients can earn before benefit reduction. In 2021 before your full retirement age, you will be able to earn up to 18,960 dollars. You will have one dollar deducted from your benefits for every two dollars that exceed this allowable earnings amount. If you reach your full retirement age in 2021, you may earn up to 50,520 dollars, up from last year’s 48,600 dollars. However, for every 3 dollar earnings over the limit, your benefits will be reduced by one dollar. This situation only applies to money earnings in the months before hitting the full retirement age. At full retirement age, no benefits will be withheld for continuing to work.
- There is a small rise scheduled in disability benefits in 2021. Legally blind recipients can receive a maximum benefit increase of 80 dollars to 2,190 dollars a month, while non-blind recipients will have a maximum benefit increase of 50 dollars a month to 1,310 dollars.
- Finally, the credit earning threshold is increasing by 60 dollars from 2020. If you were born in 1929 and beyond, you must earn a minimum of 40 credits (max of four per year) over your working life to qualify for social security benefits. This increase means for the year 2021; it will take 1,470 dollars in earnings per credit. The credit number required for disability still depends on your age and at what age you became disabled.
Click here for “Social Security Fact Sheet.”
