Well, with 2020 in the books, thought I would share some facts about 2021 and Social Security laws.
Some of the changes are as follows:
1. 1.3 percent Cost of Living Adjustment to your Social Security benefits. This is an increase of about $20 per month on the average benefit amount of $1,523 in 2020.
2. The maximum benefit amount for someone drawing in 2021 will increase from $3,011 in 2020 to $3,148 in 2021. Everyone’s benefit amounts are different and are based on your top 35 years of earnings. These amounts do not have to be sequenced or in any particular order. Also, for every year you wait to draw past Full Retirement Age, you will increase your benefit amount by 8 percent per year.
3. The amount of taxable earnings subject to payroll tax will increase from $137,700 to $142,800 in 2021.
4. The Earnings Limitations Rule changes are as follows:
A. The maximum amount you can earn, prior to the year you turn full retirement age and draw a benefit has increased from $18,240 per year or $1,520 per month to $18,960 per year or $1,580 per month.
b. The maximum amount you can earn, the year you turn Full Retirement Age has increased from $48,600 per year or $4,050 per month has increased to $50,520 per year or $4210 per month.
This earnings cap does not apply to pensions, investments or other forms of unearned income. This is a very important tool that needs to be researched before drawing. People do not realize the problems or reductions they are facing when they don’t know the exact rules and regulations that apply to their situation.
Do yourself a favor this year – when getting your paperwork ready for taxes, take the time to have your Social Security reviewed. This is recommended two years before your anticipated retirement so a PLAN can be put into place. You may think you know what your benefit amount is, but people do not realize that what you see on your statement is only an estimate. If you don’t know the questions to ask, or if you don’t know how to coordinate your benefit with your spouse’s benefit, you may be leaving additional income on the table. The ball is in your court – if you know what you are entitled to, you can tell Social Security what you are filing for. Which way works best for you?