The Key Changes in Social Security Taxes and Benefits for 2021

When it comes to your financial well-being during your life after retirement, Social Security is crucial. Not every retiree may heavily rely on their monthly payouts to finance their needs, but a significant number of them do. Thanks to Social Security, those who can no longer provide for themselves can have a good quality of life once they’ve lost their regular source of income.

However, Social security is dynamic as it is important to Americans—it undergoes several changes every year. Whether you’re a retiree, disabled, financially struggling, or an average citizen, it’s vital to pay attention to the new changes in Social Security.

The Social Security Administration (SDA) released the latest Social Security changes last October 2020 and took effect in January of this year. If you’re still unfamiliar with the updates that could affect you or are difficult to navigate around, just read on below.

Here are the changes that could affect you:

More Money for Beneficiaries

The cost-of-living adjustment (COLA) for 2021 has been raised by 1.3 percent, so you can expect more money when you receive your benefits. With inflation, the increase has come at a good time. Thanks to the COLA, the average retired employee will receive an extra $20 monthly, totaling a payout of $1,543 every month. 

However, although the increase in monthly payout is something to be grateful for, it’s important to note that the bump for this year is at a record low, being the second-smallest COLA in history. Senior citizens may have trouble financing their needs as the costs of shelter and medical care services rise.

A Rise in Full Retirement Age

The age at which you can claim Social Security retirement benefits keeps getting higher and higher. If you don’t want to claim your benefits before the normal retirement age, you will have to wait until you reach the specified age. 

Those pushing 60 will have to wait a bit longer before they can claim their retirement benefits, as the normal retirement age will increase by two months every year until it reaches 67. If you were born in 1959, you’d wait until you turn 66 and 10 months old.

Increased Earning Limits

Working while collecting Social Security benefits means that some of your benefits will be temporarily withheld. Due to the recent changes this year, your income limits have increased. 

Early filers who haven’t yet reached the full retirement age may only earn up to $18,960 annually or $1,580 monthly. For every $2 that exceeds the limit, $1 will be deducted. If you reach the normal retirement age this year, you’ll be able to earn $50,520, which is a $1,920 increase from last year. 

Conclusion

Social Security has undoubtedly helped millions of retirees over the years, but you must be responsible in noting the recent changes. By being updated with the changes in Social Security, you can avoid penalties, reductions in your benefits and have a secure life after retirement. To learn more about the updates in Social Security and how to navigate the recent changes, be sure to reach out to a professional who can help.

If you need federal employee retirement guidance, leave it to our professionals at My Federal plan to give you expert advice! Our company works with a network of licensed agents and financial advisors to facilitate meetings with federal employees that have individual retirement questions. Schedule your free retirement planning session today!

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