8 Big Social Security Changes in 2021

Social Security is one of the most important government programs in U.S. history because so many Americans depend on it.

While President-elect Joe Biden has proposed some important changes to this benefits program, there's no guarantee any of those will come to fruition in 2021. However, even with no action from lawmakers in D.C., there are some changes already baked in that will be happening this year.

Here are eight of them.

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In order to make sure benefits don't lose buying power, there's a formula applied each year to determine if retirees will get an annual cost-of-living adjustment (COLA).

In 2021, retirees will see a COLA, but it's a small one. Benefits are rising by 1.3%. This is the lowest annual increase since 2017, but it's better than nothing -- which, it seemed for a time, was what Social Security beneficiaries were going to receive due to the financial effects of the coronavirus.

Social Security has a maximum benefit. It's going up in 2021.

For those who retire at full retirement age (FRA), the maximum monthly benefit will be $3,148 this year compared with $3,011 in 2020. That means wealthier Americans will see an extra $1,644 per year from their Social Security checks.

ALSO READ: What It Takes to Earn 2021's Maximum FRA Social Security Benefit of $3,148 Monthly

Most people pay their Medicare premiums directly from their Social Security checks. Those premiums are going up a bit. Most retirees will have to pay $3.90 per month more in Medicare Part B premiums in 2021, with premiums now totaling $148.50, up from $144.60 in 2020.

Although paying more for healthcare is disappointing, retirees actually dodged a bullet as premiums would have gone up much more had Congress not capped the increase at 25% of the amount it was going to be.

Retirees who are under full retirement age and who plan to work while collecting benefits are subject to a retirement earnings test. This can result in some benefits being temporarily forfeited once you earn too much. But the earnings limits are going up in 2021.

Retirees who were under full retirement age for the entire year forfeited $1 in benefits for every $2 earned above $18,240 in 2020. But in 2021, retirees can earn up to $18,960 before starting to lose Social Security income.

For those who hit FRA sometime during the year, $1 in benefits was withheld for each $3 earned above $48,600 in 2020, but that limit is going up to $50,520 for 2021.

While you don't necessarily lose the forfeited funds forever (benefits are recalculated at FRA to account for those that were missed), it's still nice to be able to work a little more this year without your Social Security income getting smaller in the short term.

ALSO READ: Working and Collecting Social Security? Big Changes May Be on the Way in 2021

Social Security is an earned benefit. You earn your eligibility by working and getting "work credits." You can earn a maximum of four of these per year and need 40 over your lifetime to qualify for retirement benefits.

In 2020, you had to earn $1,410 to get a work credit. In 2021, that amount is going up to $1,470.

Of course, if you don't earn enough work credits on your own record, you may still qualify for spousal benefits if your spouse works and earns enough income.

The $16,728 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

Social Security is funded by payroll taxes. For most people, these taxes are collected on the entire amount of money they earn -- but that's not the case for high earners.

See, there's a maximum limit to the amount of money that's subject to Social Security tax. And that limit is going up in 2021. It was $137,700 in 2020, but it's going up to $142,800 in 2021.

If you make more than $137,700, you should be aware you'll be subject to tax on a little more of your wages next year.

In 1983, amendments to Social Security made changes to the full retirement age, or the age at which retirees get their standard benefit without any early-filing penalties or delayed retirement credits applied.

The changes were phased in gradually, though. And this year, retirees will be affected by them for the first time in a long time. See, FRA was set at 66 for anyone born between 1943 and 1954 -- and everyone with an FRA of 66 reached that milestone last year.

For anyone turning 66 in 2021, FRA is moving to 66 and 2 months. And for anyone born later, it's moving up by two months year until it hits the age of 67 for everyone born in 1960 or later. That means you'll need to wait a little longer to get your full benefit.

ALSO READ: Ready to Claim Social Security? Do These 4 Things First

Retirement benefits aren't the only ones Social Security provides -- disabled Americans can also collect benefits. You'll need a long-term medical condition to get them, though. And you can't have earnings that are too high.

In 2020, disabled beneficiaries who aren't blind are allowed to earn up to $1,260 without losing their Social Security income. This limit is going up to $1,310 in 2021, so those who are impaired by medical issues will be able to make as much as $600 extra per year without benefits ending.

The $16,728 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

As the new year starts, these changes to Social Security have already begun, affecting millions of Americans. It's imperative you're prepared for what they mean to you.

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