Changes are coming to Social Security for 2021
Social Security can be confusing. There are so many decisions to make – coordinating benefits with your spouse, when to start collecting benefits, and more. That’s why we hosted a webinar to cover your questions about Social Security planning issues. And there are some important changes coming to Social Security in 2021 that we want to highlight:
- Social Security benefits will increase by 1.3% in 2021. This is thanks to the COLA or cost of living increase. 2021’s COLA is low, comparatively speaking. In 2020 the COLA was 1.6%. And if you look at inflation, food prices have increased by 3.9% this year and the cost of medical care is up 4.9%. These are two main areas that seniors spend money on so the increase in Social Security benefits will not cover these increases.
- People may receive less Social Security benefits in 2021 because of Medicare Part B premiums. Most individuals have their Medicare Part B premiums taken out of their Social Security benefit, which is going up in 2021 to $148.50 per month. That’s up from the $144.60 per month in 2020. This increase could cause people to actually receive less in Social Security benefits. (Also of note, a person’s Medicare Part B premium may be higher than $148.50 per month depending on their yearly income in 2019.)
- Full Retirement Age for Social Security goes up again. In 2021 the FRA, which is when beneficiaries can collect 100% of their monthly benefit, will be 66 years and 10 months. This is an increase of two months. For anyone born after 1954, the FRA has been increasing by 2 months every year.
- The amount of wages taxed for Social Security is increasing. According to the Social Security Administration, the maximum amount of wages taxed for Social Security will be increasing to $142,800 in 2021. For comparison sake, it was $137,700 in 2020.
- There may be more changes coming. There are a few proposed Social Security changes that are not finalized yet. Given that, it’s too early to speculate about the changes and how it may impact you. Whenever changes are announced, we’ll be sure to get that information to all of our clients.