John F. Wasik, Contributor
April 5, 2021
Although it’s a slow-moving train, Social Security changes a little every year. Here are four things that you should know about:
1) Retirees will get a raise. Those receiving benefits get a Cost-of-Living Adjustment every year based on the consumer rate of inflation. It’s 1.3% for 2021.
2) The Social Security rate is unchanged, but amount subject to taxes is higher. “The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below). The Medicare portion (HI) is 1.45% on all earnings. Also, as of January 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes.” In 2021, the amount of income subject to Social Security taxes is $142,800, up from $137,700 in 2020.
3) The “full” retirement age is slightly higher this year. Based on your birth year, Social Security pays what they consider to be full or normal benefits at varying times. If you were born from 1943 to 1954, you have a full/normal retirement age of 66. Born between 1955 and 1959? You get full benefits two months later per year. Full retirement age is 67 for those born in 1960 or later.
4) The Social Security earnings “penalty” is slightly lower. Let’s say you’re still working, but collecting Social Security and you’re not at full retirement age (see above). Social Security will levy a tax on your earnings, which reduces your benefit. Now the cap for income subject to tax is higher: In 2020, retirees could earn up to $18,240 before payments began to shrink. The cap is $18,960 annually for 2021.
What Social Security doesn’t advertise much is the fact that you don’t have to take benefits at your normal retirement age. If you can wait until 70, “ delayed retirement credits” kick in that can raise your monthly benefit by as much as 8% per year.
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