There is no social program in this country that places more emphasis on the financial well-being of seniors than social security. Every month, nearly 65 million people receive a Social Security benefit, more than 46 million of whom are retired workers. Of these retirees, more than 3 in 5 rely on their monthly payments, which account for half of their income.
This is a dynamic program. Although the financial foundation is laid for those who can no longer afford them, the Social Security program undergoes many changes each year. These updates were released last week by the Social Security Administration (SSA).
Here is a closer look at the seven biggest changes in social security in 2021.
1. Recipients are going to get more money
October is the most important time of year for Social Security recipients, mainly when the SSA announces the Cost of Living Adjustment (COLA) for the coming year. Think of cola as the “boost” that Social Security beneficiaries receive, which is designed to keep their benefits in line with inflation.
By 2021, Social Security beneficiaries will see a good news / bad news scene. The good news is simple: you get paid more. S.S.A. Announced a 1.3% cola for the coming year, Translates to an additional $ 20 a month for the average retired worker, which is estimated to be $ 1,543 a month by January 2021. Considering that prices for goods and services fell between March and May, the corona virus outbreak 2019 (COVID-19) epidemic, 1.3% cola, was a success for the program’s 64.8 million recipients.
The bad news is that 1.3% of relationships are with the second-smallest positive cola in history. But with inflation in shelter and medical care services hovering above 1.3%, senior citizens are set to see the purchasing power of their Social Security income. Decline, Again.
2. The full retirement age is high
The only change we know will happen in 2021 Full retirement age (Also known as the “normal retirement age” by the SSA). The full retirement age of a person, as determined by the year of their birth, is the age at which they can receive 100% of the monthly payment.
By 2021, the full retirement age will rise to two months, 66 years and 10 months for those born in 1959 (i.e., beneficiaries who will be newly eligible next year). Simply put, claiming benefits at any time before reaching your full retirement age means accepting a permanent reduction to your monthly allowance. Conversely, workers born in 1959 can wait until they are 66 years and 10 months old to receive benefits.
The full retirement age for Social Security will peak at 67 in 2022 for anyone born in 1960 or later.
3. Higher income earners can expect to pay higher taxes
Keep in mind that changes in the Social Security plan will not only affect those currently receiving benefits. One of the biggest updates next year is an increase in the wage tax revenue cap.
Wage tax is the labor of social security. In 2019, it earned $ 944.5 billion of the $ 1.06 trillion raised by the project. Revenue is brought in by paying 12.4% tax Earnings earned (Wages and Salaries, but not Investment Income) As of 2020.0 0.01 to 7 137,700. Note, All income earned above $ 137,700 by 2020 is tax deductible.
In 2021, all income earned up to 2 142,800 will be taxed, which means an increase of 5,100. For the approximately 6% of workers expected to hit this cap, we are talking about a wage tax increase of up to $ 632.40 next year.
If you are wondering how the SSA brought in 2 142,800 as the cap for the next year, it is related to the year-on-year increase in the National Average Wage Index (NAWI). Between 2018 and 2019, NAWI rose from $ 52,145.80 to $ 54,099.99 – when it was 3.74% or 3.7% of the nearest tenth. Next year’s tax cap will be 3.7% higher than the 7 137,700 in 2020. It’s so simple.
4. The rich can get a big monthly benefit
While high-income earners will be in the process of opening their wallets a little more elaborately by 2021, it can be expected that the beneficiaries who need to do better will also get more. After SSA raised its monthly pension benefits to 0,011 for those in full retirement age by 2020, the maximum wage at full retirement age is set to increase to $ 3,148 per month in 2021. This is $ 1,644 a year for rich workers.
To earn this maximum monthly wage, workers must do three things:
- Waited until their full retirement age to claim benefits.
- Every year less than 35 people worked because they worked for at least 35 years The result will be monthly 0 averages on their monthly payments.
- The maximum taxable income cap for each of the 35 years that the SSA takes into account when calculating a person’s retirement benefit has hit or exceeded.
A check next to these three conditions allows a retiree to receive the maximum monthly benefits.
5. Disability income limits climb higher
There is no doubt that the primary job of Social Security is to financially protect the retired employees of our country. But Do not pay attention 9.7 million beneficiaries make monthly payments from the Social Security Disability Insurance Trust. By 2021, income limits for benefits for disabled beneficiaries will be raised further.
For example, non-visually impaired beneficiaries can earn up to 2,260 per month in 2020 without stopping their Social Security payments. Next year, the threshold will increase by $ 50 a month to 3,110. This means that non-blind disabled beneficiaries can earn up to $ 600 per year without losing their benefits.
This increase is even greater for visually impaired beneficiaries. Everyone who falls into this category will be allowed to earn up to 1 2,190 per month by 2021 – $ 80 more per month than the 2020 limit – without stopping their benefits.
6. Stop gates for early filers receive an incentive
There is social security This is one of the many ways in which early filers can be fined. Nothing is more confusing or surprising for retired workers than the pension income test. Simply put, the SSA withholds some of the benefits of the early-filer if the pension income test earns more than the default income limit. By 2021, these income limits will be higher.
For example, only early filers who have not reached full retirement age by 2020 Annually, up to 18,240 are allowed to earn (5,520 per month) Benefits before 1 Benefits can be deducted for every $ 2 of income above this limit. By 2021, early filers who have not reached the full retirement age can earn up to $ 9,18,960 per year, or $ 60 a month ($ 1,580 a month) before kicking off.
Early filers, who will reach full retirement age by 2021, will see an incentive on the threshold. Next year, early filers who reach their full retirement age at some point in the year will be allowed to earn up to 50 50,520 (4,210 per month), with benefits 1 benefit terminated for every $ 3 of income above this limit. For those interested, this is an increase of $ 160 a month from the 2020 level.
Note that the pension income check is no longer applicable once you reach your full retirement age (regardless of the benefits you claim), and terminated benefits will be refunded to recipients in the form of a higher monthly payment after reaching full retirement age.
7. You need to earn more to qualify for a pension benefit
Last but not least, working Americans will have to work a little harder to qualify for a Social Security retired labor benefit.
As you may have heard, Social Security is not granted to someone born in the United States. To receive the pension benefit, you must have earned 40 lifetime work credits, of which you can earn a maximum of four credits each year. These credits are given according to a person’s income in a given year.
For example, workers received a lifetime work loan with 4,410 of the income earned in 2020. To put it another way, if a worker makes a minimum of 6 5,640 (4 1,410 X 4) of the income earned this year, they will receive a maximum of four credits.
By 2021, it will take 4,470 of the income earned to get a lifetime work loan or 8 5,880 for the full year to increase your Social Security work credits.
Everyone will have to work a little harder to ensure a pension benefit Social security, The menu for qualifying is set relatively low.