There's a lot to learn about Social Security, whether you're new to collecting benefits, on the cusp of signing up, or planning ahead. With that in mind, here are five important figures that are unique to 2021 that you should be aware of.
This is the maximum amount of Social Security tax you'll pay this year if you're self-employed. Each year, there's a wage cap put in place for Social Security taxes. In 2021, that cap is $142,800. Meanwhile, the Social Security tax rate is 12.4%. If you're employed by another company, you'll split your Social Security tax liability with your employer so you pay $8,853.60 in taxes and your employer pays that same amount. If you work for yourself, you have to fork over the entire $17,707.20. Fear not -- you can claim some of that money back as a deduction on your taxes.
Though you're allowed to work and collect Social Security at the same time, you'll risk having a portion of your benefits withheld temporarily if your income exceeds the earnings test limits. This year, the limit for workers who haven't reached full retirement age and won't do so this year is $18,960. Beyond that, you'll have $1 in benefits withheld for every $2 you earn.
If you'll reach full retirement age this year, you get a higher earnings test limit -- $50,520. From there, however, you'll have $1 in benefits withheld for every $3 you earn. Benefits withheld in this situation aren't forfeited permanently. Rather, they're returned to you in the form of a higher monthly benefit once you reach full retirement age. But remember, claiming benefits before full retirement age results in a permanent reduction, so if you still have a paycheck, you may want to put off your filing until full retirement age, or even beyond.
This is the average Social Security benefit recipients will collect in 2021, according to the Social Security Administration, and it accounts for the 1.3% cost-of-living adjustment that seniors are getting this year. Prior to that, the average monthly benefit sat at $1,523.
This is the maximum Social Security benefit you can receive in 2021. To score it, however, you'll need to have a history of high earnings, have at least 35 full years of work under your belt, and postpone your filing as long as possible (until age 70) to maximize your delayed retirement credits.
The more of an effort you make to understand how Social Security works, the better equipped you'll be to maximize your own benefits. Keep these numbers in mind so you'll know how much Social Security tax you'll pay, how much you can earn if you intend to work and collect benefits simultaneously, and what your monthly benefit could amount to. Remember, too, that the above numbers adjust every year. While it's a good idea to commit them to memory for now, you should keep tabs on upcoming Social Security changes to fully stay in the loop.