The beginning of a new year is often a time of change, including for seniors on Social Security.
For Americans receiving these retirement benefits — some 50.7 million ages 65 or older, according to Social Security data from November — it’s time to review a few important differences for 2021.
From (slightly) higher payments to a shift in the retirement age for many, here are eight changes you’ll want to know about — and may want to discuss with a financial professional.
1. Payments are increasing (a little)
It won’t be life changing, but yes, you’re receiving more money this year. The Social Security Administration announced a 1.3% cost-of-living adjustment for 2021, designed to help keep benefits on par with inflation.
For the average retired worker, the monthly benefit is rising by $20 to $1,543, up from last year’s $1,523, the agency says.
If that doesn’t seem like a big increase, it isn’t. A 1.3% cost-of-living adjustment is the second-lowest annual raise in the program’s history.
One way to stretch those dollars — even if it’s just an extra $20 a month — is by making deposits into a high-interest savings account where your money can grow more quickly than it would in a standard savings account.
2. A modest hit from Medicare
Many Americans who sign up for Medicare at age 65 have their Part B premiums automatically deducted from their Social Security payment. Part B is Medicare’s “medical insurance” that covers doctor visits, lab work, medical equipment and necessary preventive services.
Congress passed legislation last year to keep the 2021 Part B premium increase modest, despite higher-than-expected Medicare spending in 2020 due to the coronavirus pandemic. So, the cost is going up just $3.90 per month.
That means even though the raise in your monthly Social Security payment is pretty paltry this year, at least it won’t be completely wiped out by higher Medicare premiums.
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3. SSI recipients get more
Social Security’s 1.3% 2021 cost-of-living adjustment isn’t limited to retirement benefits.
The new year also has brought a small increase for those receiving Supplemental Security Income, a program for those with little or no income for basic living expenses, including Americans who are elderly, blind or disabled.
SSI benefits are available to low-income individuals who have either never worked, or have’t worked enough to be eligible for the regular Social Security benefit.
The 1.3% increase translates to $11 more a month for the typical SSI recipient, from $783 to $794, the Social Security Administration says.
4. The ‘full retirement’ age keeps rising
Though 65 is still thought of as America’s traditional retirement age, it’s going to take just a bit longer to reach Social Security’s official full retirement age.
It’s rising again this year: For those born in 1959 who are thinking of retiring soon, the full retirement age will be 66 years and 10 months — two months longer than for those born in 1958.
If you decide to begin taking retirement benefits before reaching full retirement, your monthly payment will be reduced. For example, if you turn 62 in 2021 and decide to claim Social Security, your benefit will be about 29.2% lower than if you wait until full retirement age.
Social Security’s intricate rules can make retirement planning tricky, which is why it’s smart to get advice from experts. Today, an online financial planner can help you develop a personalized plan, to make sure your retirement is as rewarding as can be.
5. Keep more of your income if you file early
During this time of high unemployment and layoffs related to COVID, it’s possible more Americans will begin taking Social Security early. You can receive your benefits starting at age 62.
Not everyone receiving early benefits completely leaves the workforce, and if the Social Security Administration says you’re earning too much, it will hold back your retirement money by $1 for every $2 you earn.
In 2020, the earnings cap was set at $18,240 per year, or $1,520 a month. This year, early filers can earn up to $18,960 — $1,580 a month — before they start getting dinged.
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6. Eligibility requirements to claim benefits are higher
In order to claim Social Security in retirement and receive benefits, you need to earn Social Security “credits” during your working years.
“We base Social Security credits on the amount of your earnings. We use your earnings and work history to determine your eligibility for retirement or disability benefits or your family’s eligibility for survivors benefits when you die,” the program’s website says.
In most cases, you need to accrue 40 “work credits” to become eligible. You get one work credit for three months of qualifying work during a year. And, your earnings over those three months must be at least $1,470 in 2021, $60 more than last year.
That may not seem like a high bar to meet, but 2020 illustrated just how precarious employment can be. If you’re having trouble earning enough to pay the bills, here are 15 ways to boost your income this year.
One last big change in 2021: Big earners can collect higher payouts.
Previously, your Social Security benefits were capped at $3,011 at full retirement age, even if you earned millions during your career. Those fortunate few can now receive a benefit as high as 3,148 under 2021’s new limit.
You don’t need to have millions on your earnings record to collect more from Social Security. Here are the best ways we know to boost your benefits.