By Barry Zimmer on November 24th, 2020 in Retirement Planning
The new year will be here before you know it, and the Social Security Administration has released their updated figures for 2021. We will take a look at them in this post, and we will provide all the Medicare details when they become available.
Cost of Living Adjustment (COLA)
Since prices tend to rise on an ongoing basis, the Social Security Administration will usually provide cost-of-living adjustments. We say “usually” because there was no change at all in 2009, 2010, and 2015, and in 2016, the COLA was a measly .3 percent.
Next year there will be a 1.3 percent Social Security cost-of-living adjustment. This equates to a $20 increase for someone that is receiving the average benefit, which is $1523 in 2020.
Max Earnings for Early Social Security Beneficiaries
You become eligible for a full Social Security benefit when you are 66 if you were born between 1943 and 1954. The eligibility age rises by two months each year after that, so someone born in 1955 will become eligible for a full benefit two months after they reach the age of 66.
It goes up by two months in this manner until 1960 when the gradual increase stops at 67 years of age. Anyone that was born in 1960 or a later year will become eligible for a full benefit when they are 67 under currently existing laws.
This is the age for the full benefit, but you have another option. You can accept your benefit when you are as young as 62, but there are two reasons why you may want to wait it out.
One of them is the fact that the benefit would be considerably less than your full benefit. The reduction would be somewhere between 25 percent and 30 percent, and the exact amount would be tied to your birth year.
If you are working when you are receiving an early benefit, you are penalized if you make more than a certain amount of money. The limit is going up from $18,240 this year to $18,960 in 2021.
How does the penalty work? Your benefit is reduced by one dollar for every two dollars that you make above this limit, so the early option is a very poor choice for most people that work full time.
Taxable Income Ceiling
There is a maximum amount of income that can be taxed for Social Security purposes, and it is subject to annual upward revisions. This year, the maximum is $137,700, and in 2021, the ceiling will be $142,800.
Since there is a limit to the amount that can be taxed, there is also a max benefit. The maximum monthly benefit has been $3011 in 2020, and it will rise to $3148 next year.
Medicare Part B Premium Increase
As we stated in the opening, we do not have all the updated Medicare figures yet, but there is one piece of information that we can share at this time. Part B is the portion of the program that pays for care that is provided by doctors, and you have to pay a monthly premium for this coverage.
There are annual premium increases, but because of a provision contained within the current COVID-conscious budget, it cannot exceed 25 percent of the increase that would ordinarily be warranted.
This provision is temporary, but there is a built-in mechanism that limits the premium increases on an ongoing basis. If the cost-of-living adjustment in a given year is less than the increase in the Part B premium, the benefit will not be reduced.
Attend a Free Webinar
We are conducting a number of webinars in the near future, and this is a great way to obtain some very important information from the comfort of your home. These sessions are free, but we ask that you register in advance so we can reserve your spot.
You can see the dates if you visit our webinar page, and you when you identify the session the works for you, follow simple instructions to register.