Pamela Kweller RSSA Staff
The Social Security program has been around for 85 years! Over the course of 85 years, there have been many changes to the program and currently, there are over 2,700 rules governing the program. Here are 5 of the biggest changes that will take effect beginning January 2021.
1. Social Security beneficiaries will receive more money each month.
There will be a 1.3% increase in benefits in 2021. This is the Cost of Living Adjustment commonly referred to as COLA. Beginning January 2021, more than 64 million Social Security beneficiaries will receive a 1.3% increase in their Social Security benefits.
The average monthly Social Security benefit for 2020 is $1,503. With a 1.3% increase, the average beneficiary will expect to receive approximately $20 more each month or $240 annually.
2. The amount of earnings subject to the payroll tax has been increased.
Social Security is a pay-as-you-go program. Social Security recipients receive benefits from the workers who pay into the system through the payroll tax (FICA or SECA).
12.4% of income is subject to the Social Security payroll tax. Half is paid by the employee and half is paid by the employer. If a worker is self-employed, they must pay the full 12.4%. However, not all earnings are subject to the Social Security payroll tax, only up to a certain amount.
In 2020, the maximum taxable earnings limit was $137,700. In 2021, the limit has increased to $142,800. Earnings that exceed $142,800 will not be subject to the Social Security payroll tax.
Keep in mind, there is no limit for the Medicare payroll tax. The Medicare payroll tax will be applied to all earned income.
3. The Maximum Monthly Benefit Has Increased.
If someone filed for Social Security benefits at their Full Retirement Age (FRA) in 2020, the maximum monthly benefit possible to receive was $3,011. In 2021, that maximum monthly payout has been increased to $3,148.
Plus, if someone waits to file past their FRA up until age 70, they can receive even more money each month.
4. Workers Need To Earn More Money To Earn Work “Credits.”
In order to be eligible for Social Security benefits, you must have earned a minimum of 40 “credits” or “quarters of coverage”. The credit may only be earned from a job that pays Social Security payroll taxes. You cannot earn more than 4 credits in one year and therefore, you must work a minimum of 10 years in order to earn those 40 credits.
The amount of earnings required for one credit in 2020 was $1,410. In 2021 the amount has increased to $1,470. This means that you can earn the maximum 4 work credits in 2021 by earning a minimum of $5,880.
5. Disabled beneficiaries can earn more income and still receive benefits.
In order to receive benefits, disabled workers (those who qualify for Social Security disability benefits) can only continue to receive benefits if they earn less than a specific amount of income.
In 2020, non-blind disabled workers could only earn up to $1,260 each month before becoming ineligible to receive benefits. However, in 2021 non-blind disabled workers will be able to earn up to $1,310 each month. And blind disabled workers will be able earn up to $2,190 each month in 2021 compared to the $2,110 limit in 2020.