What You Need to Know About Social Security in 2021

Social Security serves as a key source of income for millions of seniors. Whether you're already collecting benefits, are planning to sign up in the near term, or are nowhere close to filing but want to understand how the program impacts you, here are several changes you should know about this year.

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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.

Age 62 is the earliest possible age to sign up for Social Security benefits, so if you were born in 1959, it means you can file this year. But if you claim benefits before reaching full retirement age, you'll slash those monthly payments for life.

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Full retirement age is 66 and 2 months for those born in 1955, so you may be entitled to your full monthly Social Security benefit this year. That said, if you delay your filing, you can boost your benefits by 8% a year, up until you reach the age of 70.

Each year, there's an earnings cap that dictates how much of your income you'll pay Social Security taxes on. This year, that cap is $142,800. Since the Social Security tax rate is 12.4%, it means the most tax you can pay this year under the current rules is $17,702.20 if you're self-employed, or $8,853.60 if you're a salaried worker, in which case your employer will split that tax with you.

Though the current Social Security wage cap is $142,800, President Biden wants to impose taxes on wages above $400,000. Higher earners wouldn't pay taxes on earnings between $142,800 and $400,000 under this plan. Rather, taxes would come back into play once the $400,000 mark is surpassed. But either way, this proposal hasn't passed into law, so there's no need to worry about it just yet.

ALSO READ: 3 Costly Social Security Mistakes People Make Long Before Claiming Benefits

You can work and collect Social Security at the same time, and once you reach full retirement age, that won't impact your benefits at all. But if you haven't reached full retirement age, you'll risk having benefits withheld if you earn too much. This year, you can earn up to $18,960 without impacting your benefits, but from there, you'll have $1 in Social Security withheld for each $2 you earn.

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.

If you're working and collecting Social Security at the same time, the earnings test limit is $50,520 if you'll be reaching full retirement age at any point in 2021. For earnings above that limit, you'll have $1 in Social Security withheld for each $3 you earn.

The average senior on Social Security today collects $1,543 a month. That's after the 1.3% cost-of-living adjustment seniors got going into 2021. But it’s also not enough for a lot of people to live on, which is why saving for retirement is so important.

ALSO READ: Raise Your Annual Social Security Benefit by $4,440 With This Simple Move

Scoring the maximum Social Security benefit is something many seniors can't do. Seniors with a history of high earnings who delay their filing until age 70, however, have a shot at collecting up to $3,895 this year.

To collect Social Security as a senior, you'll need at least 40 work credits in your lifetime. This year, you'll earn one work credit per $1,470 of earnings. The maximum number of credits you can accrue in a single year is four, so if you earn at least $5,880 this year, you'll get your four credits for 2021.

The more you know about Social Security, the better positioned you'll be to plan well for retirement and make the most of your benefits. Keep these points in mind, but remember, a lot of the numbers mentioned here are likely to change once 2021 comes to a close.

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