Social Security benefits are only designed to replace around 40% of your pre-retirement income, but millions of retirees depend on their monthly checks just to pay the bills. In fact, around 64% of current retirees say Social Security is a major source of income, according to a report from the Society of Actuaries.

Whether or not you expect your benefits to be your primary source of income, it never hurts to maximize your monthly payments. And there are a few ways you may see a boost in benefits in 2021.

Older man wearing sunglasses throwing dollar bills in the air

Image source: Getty Images.

1. The 1.3% cost-of-living adjustment

Every year, the Social Security Administration (SSA) adjusts beneficiaries' monthly payments to account for changes in inflation. This is called the cost-of-living adjustment (COLA), and it's essentially a "raise" retirees receive that will help your benefits keep up with rising costs.

The COLA for 2021 is 1.3%, and the average retiree will see their benefit amount increase from $1,523 per month to $1,543 per month after the COLA. While this COLA is one of the smallest on record (in previous years it generally hovered around 2% to 3%), it's significant considering the fact that earlier this year, many experts believed they wouldn't receive a raise at all.

2. Earnings test limits are increasing

Social Security's retirement earnings test applies to those who continue to work after claiming benefits, and it's the limit for how much you can earn without facing benefit reductions. Here's how these limits are changing for 2021, depending on whether you'll be under your full retirement age or reaching your full retirement age in 2021:

Year Income Limit for Those Under Full Retirement Age Income Limit for Those Reaching Full Retirement Age
2021 $18,960 $50,520
2020 $18,240 $48,600

Source: Social Security Administration.

If you earn more than those limits, your benefits will be reduced or even withheld entirely depending on your income. In addition, if you've already reached your full retirement age (FRA), you won't have to worry about these limits because they only apply to those under FRA.

With higher earnings test limits, you can earn more without having your benefits reduced. That means you'll be able to keep more of your monthly payments even if you continue to work.

3. The maximum benefit amount is increasing

In 2021, the maximum amount you can receive at your FRA is $3,148 per month, which is up from $3,011 per month in 2020.

In order to receive the maximum benefit amount, you'll need to have worked for at least 35 years, reached the maximum taxable earnings limit consistently over those 35 years (which for 2021 is $142,800 per year), and waited until your FRA to begin claiming benefits.

Even if you're not able to earn the maximum benefit amount, you can still boost your benefits by working longer, waiting to claim Social Security, or increasing your income. Any one of these factors can result in larger checks each month, and if you expect to depend on your benefits for a good portion of your income in retirement, it's wise to maximize your monthly payments any way you can.