No social program in this country is more important to the financial situation of the elderly than social security. Every month, nearly 65 million people receive social security benefits, of which more than 46 million are retired workers. Among these retirees, more than three-fifths of retirees rely on their monthly expenses to account for at least half of their income.
This is also a dynamic program. Despite laying the financial foundation for those who cannot support themselves, the social security plan undergoes many changes every year. These updates happened to be released by the Social Security Administration (SSA) last week.
Here are the seven biggest changes in Social Security in 2021
1. The recipient will get more money
For social security recipients, October is the most important time of the year, mainly because it is the time when SSA announces the cost of living adjustment (COLA) for the coming year. Think of COLA as a “salary increase” for beneficiaries of social security, aiming to align their benefits with inflation.
For 2021, social security beneficiaries are researching good news/bad news. The good news is simple: you will get more money. SSA announced that there will be 1.3% COLA in the coming year. For the average retired worker, this will translate into an additional $20 per month. By January 2021, the estimated monthly expenditure is $1,543. Due to the 2019 Coronavirus Disease (COVID-19) pandemic, service prices dropped between March and May, and 1.3% of COLA was a victory for the program’s 64.8 million recipients.
The bad news is that 1.3% of people have become the second smallest positive coke in history. But with the inflation rate of housing and medical services exceeding 1.3%, the elderly will once again see a decline in the purchasing power of their social security income.
2. The retirement age is gradually increasing
The only change we are certain is the increase in the full retirement age that will occur in 2021 (SSA also refers to this as the “normal retirement age”). A person’s full retirement age refers to the age at which they can receive 100% of the monthly payment determined by their year of birth.
By 2021, for those born in 1959 (ie, beneficiaries who can re-qualify next year), the full retirement age will be raised by two months to 66 years and 10 months. In short, claiming benefits at any time before reaching full retirement age means permanently reducing your monthly expenses. Conversely, waiting for workers born in 1959 to wait until 66 years and 10 months before receiving their pension can increase their pension.
For those born in 1960 or later, the full retirement age of Social Security will reach a peak of 67 in 2022.
3. High-income earners can expect to pay more taxes
Remember that changes to the social security plan will not only affect those currently receiving benefits. One of the biggest updates next year is to increase the payroll tax income ceiling.
Payroll tax is the main force of social security. In 2019, US$944.5 billion was generated out of the US$1.06 trillion raised by the plan. As of 2020, a 12.4% tax is levied on income (wages and salaries, not investment income), and income is between 0.01 and 137,700 US dollars, which brings income. Please note that all income above $137,700 in 2020 will be exempt from payroll tax.
In 2021, all taxable income with income of US$142,800 has increased by US$5,100. For about 6% of workers who are expected to reach this cap, we are talking about an increase in salary tax to $632.40 next year.
If you want to know how SSA set the upper limit of $142,800 for next year, it has to do with the year-on-year increase in the National Average Wage Index (NAWI). Between 2018 and 2019, NAWI rose from US$52,145.80 to US$54,099.99-an increase of 3.74%, which is 3.7% when rounded to tenths. The tax ceiling for next year is 3.7% higher than 2020’s $137,700. It’s that simple.
4. The rich can get greater monthly income
Although high-income earners will be required to relax their wallets a bit in 2021, wealthy beneficiaries are also expected to get more. After the SSA capped the monthly pension for people of full retirement age to US$3,011 in 2020, by 2021, the maximum payment for full retirement age will increase to US$3,148 per month, which is an additional annual for wealthy workers An increase of 1,644 USD.
To get the maximum monthly expenditure, workers need to do three things:
- Wait until they reach retirement age before receiving benefits.
- Working for at least 35 years, because there are fewer than 35 work results per year, the final average monthly expenditure is $0.
- When calculating a person’s pension, SSA considers or exceeds the maximum taxable income limit for each of the 35 years.
The checks next to all three criteria allow retirees to get the maximum monthly benefits.
5. Higher income threshold for persons with disabilities
There is no doubt that the main job of social security is to economically protect our country’s retired labor force. However, please do not ignore the fact that 9.7 million beneficiaries receive monthly payments from the Social Security Disability Insurance Trust Fund. In 2021, the income threshold for stopping subsidies for disabled beneficiaries will be further raised.
For example, by 2020, non-blind disabled beneficiaries can earn up to $1,260 per month without having to stop their social security expenditures. Next year, this threshold will increase by $50 per month to reach $1,310. This means that non-blind disabled beneficiaries can earn an extra $600 per year without losing their benefits.
For blind disabled beneficiaries, the increase is even greater. People in this category will be allowed to earn up to $2190 per month in 2021-$80 higher than the 2020 threshold-without stopping benefits.
6. The withholding threshold for people who file a lawsuit has increased
Social Security has various methods to punish early notifications. For retired workers, nothing is more confusing or surprising than the retirement income test. In short, if the income of retirees exceeds the preset income threshold, they can pass the retirement income test to withhold some or all of the benefits of early applicants. In 2021, these income thresholds will be further raised.
For example, those early filers who do not reach the full retirement age in 2020 can only receive up to $18,240 ($1,520 per month) in income, and every $2 in income that exceeds this threshold will be withheld $1. In 2021, early filers who have not reached the retirement age can earn US$18,960 per year, or an additional US$60 per month (US$1,580 per month) before they start withholding.
Early applicants who will reach full retirement age in 2021 will also see an increase in the withholding threshold. Next year, early applicants who reach full retirement age at some point during the year will be allowed to earn up to $50,520 ($4,210 per month), and $1 will be withheld for every $3 of income that exceeds this threshold. For those who are curious, this is an increase of $160 per month from 2020 levels.
Please note that once you reach full retirement age (regardless of when you receive benefits), the retirement income test is no longer applicable, and after reaching full retirement age, withholding benefits will be refunded in the form of higher monthly expenses Receiver.
7. You have to earn more to get a pension
Last but not least, working Americans will have to work harder to fight for the benefits of social security retired workers.
Although you may have heard of it, Social Security is not just for being born in the United States. In order to earn a pension, you need to earn 40 life-long work credits, of which up to 4 credits per year. These credits are awarded based on personal income in a given year.
For example, a worker receives a lifetime work credit in 2020 and his income is $1,410. In other words, if a worker’s net income this year is at least $5,640 ($1,410 X 4), they will receive up to four credits.
In 2021, you will need to earn $1,470 to earn a lifetime work point, or $5,880 for the entire year to maximize your Social Security work points.
Although people must work harder to ensure retirement benefits from social security, the threshold for eligibility is set relatively low.