During the later part of 2020, the Social Security Administration made some major announcements regarding Social Security benefit changes that will affect those applying for Social Security benefits for the first time and those who are currently on Social Security. In this post, we will explain in detail the 5 biggest Social Security changes for 2021.
We will cover how much Social Security checks are expected to rise.
In addition, we will give you a history of COLA increases for the last 10 years so you can get an idea of what to expect in 2022.
Also, the full retirement age will go up in 2021 and 2022. We will talk about that in some detail.
Finally, another important change that is coming is the increase in Medicare cost, which we cover as a bonus.
To learn about the 5 biggest Social Security changes for 2021, continue reading below.
Alert: See the 5 ways Social Security will be changing in 2022
5 Biggest Social Security Changes for 2021
Here are the 2021 social security changes you need to know about, including how they could impact your benefits.
1. Social Security recipients will get more money
In 2021, Social Security recipients will see a 1.3 percent Cost of Living Adjustment (COLA) increase.
For the average person receiving Social Security benefits, their monthly Social Security check will rise by $20 to $1,543 in January from $1,523 in 2020.
In addition, the average retired couple who both collect Social Security benefits will see their check rise by $33 to $2,596, up from $2,563.
Furthermore, for Disability beneficiaries, their average monthly benefits will increase by $16 to $1,277 from $1,261.
Also, 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.
Here’s the list of average monthly benefits Social Security recipients can expect in 2021. We have also shown the difference from 2020:
1.Social Security Retirement Beneficiaries – Individual: $1,543 (+$20)
2. Social Security Retirement Beneficiaries – Couple: $2,596 (+$33)
3. Social Security Retirement Beneficiaries – Widow or widower: $1,453 (+$19)
4. Social Security Retirement Beneficiaries – Widow with two kids: $3,001 (+$39)
5. SSDI Benefits for Individuals: $1,277 (+$16)
6. SSDI Benefits for Individuals w/ spouse, kids: $2,224 (+$29)
7. SSI Benefits for individuals: $794 (+$11)
8. SSI Benefits for couples: $1,191 (+$16)
Cola Changes
While we don’t know what the increase will be, here’s a history of COLA for the last 10 years.
As you can see, there’s been an increase every year for the last 10 years except in 2016.
Social Security COLA History
Here’s a look at COLA increases since 2011.
2020: 1.6%
2019: 2.8%
2018: 2%
2017: 0.3%
2016: No increase.
2015: 1.7%
2014: 1.5%
2013: 1.7%
2012: 1.7%
2011: 3.6%
2. Earnings subject to social security tax will increase
High earners can expect to pay more to social security taxes in 2021.
That is because the maximum taxable earnings rate will increase from $137,700 to $142,800.
However, the social security tax rate that employees are required to pay will remain the same, at 6.2 percent.
In addition, for people who are self-employed, the Social Security tax rate will remain at 12.4 percent.
3. Full Retirement Age is Going Up
Full retirement age in 2021 is going higher by two months, to 66 years and 10 months for people born in 1959.
However, it will peak at age 67 in 2022 for anyone born in 1960 or later.
The earliest a recipient can obtain Social Security retirement benefits is age 62.
However, obtaining these benefits before your full retirement age will result in your monthly payments being reduced.
If you wait to obtain benefits until age 70, you will receive a 32 percent higher annual payout.
4. Changes to Benefit Reduction Rules
In 2021, the amount of money Social Security recipients who work can make before their benefits are reduced will go up.
If you are working while receiving social security, it’s possible that the SSA can temporarily withhold all or part of your benefits.
Here are the new rules for 2021:
If you are receiving Social Security benefits before your full retirement age, you will be able to earn up to $18,960.
This is a $720 increase from the 2020 limit.
Anyone who falls into this category will have $1 deducted from their benefits for every $2 earned that exceeds this allowable earnings amount.
However, if you reach your full retirement age in 2021, you may earn up to $50,520, up from last year’s $48,600.
Then, for every $3 in earnings over the limit, you will see your benefits reduced by $1.
It is important to state that this reduction in benefits due to employment only applies to those who are receiving social security before hitting their full retirement age.
That’s because, at full retirement age, no benefits will be withheld if you continue to work.
5. Lifetime work credits Amount Go Up
Americans are now going to have to work a bit harder to qualify for social security retirement benefits.
That is because the credit earning threshold is increasing by $60 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.
In 2020, the minimum about you have to earn a year to get the four credits for that year was $1410.
However, in 2021, that amount will increase to $1470, an increase of $60.
This means that in 2021, the minimum amount you have to earn to get all four credits for the year will be $1470.
Bonus: Medicare costs to rise
For seniors that are concerned about the rising cost of healthcare, 2021 will be no different – unfortunately.
Here’s how much Medicare costs will increase in 2021:
- The standard monthly premium for Medicare Part B will be $148.50, up from $144.60 in 2020.
- The annual deductible for Medicare Part B will be $203 — a $5 increase.
- The Medicare Part A inpatient hospital deductible will be $1,484 — a $76 increase.
Biggest Social Security Changes for 2021 Summary
Here’s the bottom line:
In 2021, Social Security recipients will see a 1.3 percent Cost of Living Adjustment (COLA) increase.
The average Social Security benefits will rise by $20 to $1,543 in January 2021 from $1,523 in 2020.
The maximum taxable earnings rate will increase from $137,700 to $142,800.
Also, the full retirement age is going higher by two months, to 66 years and 10 months for people born in 1959.
Questions?
If you still have questions, you should leave a comment below.
However, what may be an even greater help is to join our FREE Facebook members group about Making Sense of Social Security Benefits.
It’s a very active group with some really smart people who love to answer any questions you may have about Social Security Benefits.
Also, from time to time, our team of editors drop in to contribute and answer questions.
Finally, you may like these popular articles, including How to Change Your Address with Social Security, the 2021 Social Security Calendar, and January 2021 Social Security Payment Calendar.
