We help seniors prepare for the eventualities of aging, and for most people, Social Security is a very important piece of the retirement puzzle. Each year, relevant dollar amounts are reassessed in light of the current Consumer Price Index that is maintained by the United States Department of Labor.
The figures for 2021 have been released, and we are going to take a look at them in this post. Medicare and Medicaid have not made their updates available yet, but we will share that information as soon as it is made public.
Social Security Cost of Living Adjustment (COLA)
Though it is not a given, there are usually cost-of-living adjustments for people that are receiving Social Security benefits. In 2021, the benefits will go up by 1.3 percent, and this will put an extra $20 bill in the pockets of people that are receiving the average benefit.
How much is the average? This year, it is $1523, and a 1.3 percent bump will increase it to $1543.
Maximum Taxable Earnings for Social Security
The old age, survivors, and disability insurance (OASDI) tax rate is 6.2 percent, and this is the tax that you pay to gain Social Security eligibility. There is a maximum amount of income that can be taxed for this purpose, and it is going up from $137,700 to $142,800 next year.
Your Social Security payout is based on the 35 years during which you earned the highest amount of taxable income. People that have been at the top of the spectrum for their entire careers can qualify for the maximum benefit.
This year, the max benefit is $3011 a month, and it will rise to $3148 in 2021.
Early Retirement Earning Threshold
You can receive your full Social Security benefit when you are 66 if you were born between 1943 and 1954. There is a two month per year graduation after 1954, so the eligibility age is 66 years and two months for someone who was born in 1955.
It is 66 and four months for people born in 1956, etc., until it reaches 67 in 1960. Anyone that was born during this year or any year after 1960 will be eligible at the age of 67.
There is also an early retirement option that gives you the ability to accept your benefit when you are 62 years of age. That’s the good news, but the bad news is that you would get somewhere between 70 and 75 percent of your full benefit depending on your birth year.
In addition to the diminished benefit, there is another drawback that will take the early benefit off the table for many people. Your benefit is reduced by one dollar for every two dollars that you earn in a year that is over a certain prescribed limit.
The limit in 2021 will be $18,960, which is an increase of $720 over this year’s limit.
Medicare Part B Premium Increase
There is one thing we can tell you about the Medicare numbers for next year. Part B is the portion of the program that covers treatments that are provided by doctors and other types of approved health care providers. You have to pay a monthly premium for this coverage.
In 2020, the monthly premium for people earning $87,000 or less is $144.60. The increase for next year has not been announced, but it will be lower than it would have been under different circumstances.
When a stopgap budget measure was passed in March, it was established in light of the economic impact of the pandemic. There is a provision contained in the budget that limits the Part B premium increase to no more than 25 percent of the full increase that is warranted.
We should also point out the fact that benefit recipients are “held harmless” if the cost-of-living adjustment is not enough to cover the Part B increase in any given year. This is a permanent provision that has nothing to do with the pandemic.
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If you are ready to develop a comprehensive plan for aging, we are here to help. You can set up a consultation appointment if you call us at (585) 546-1734, and there is a contact form on this site you can use to send us a message.