The Social Security Administration announced that it will make an increase of 1.3% in Social Security Disability and Supplemental Security Income, as a result of a Cost-of-living-adjustment. This COLA increase will take effect immediately for all 71 million Americans receiving monthly benefits paychecks. This COLA adjustment is designed to help beneficiaries keep up pace with the inflation.
COLA changes for 2021
The 1.3% COLA increase for 2021 will take into effect immediately in January 2021 for approximately 64 million beneficiaries of the Social Security benefits. On the other hand, the COLA increase for the 8 million plus Supplemental Security income beneficiaries will get the change implemented from December 31' 2020.
As a result, the maximum amount of taxable income will increase from $142,800 in 2021 from $137,700 in 2020. Moreover, the earnings limit for younger workers (who haven't yet reached full retirement age) will increase from to $18,960. In contrast, the earnings limit for people reaching full retirement age in 2021 will increase to $50,520. However, for every $3 earned above $50,520, the SSA will deduct $1 until the month you will reach full retirement age.
The Social Security Administration makes the necessary changes in COLA with relation to an annual change in the consumer price index listed by the Department of Labor's Bureau of Labor Statistics. Also, the SSA will normally notify the Social Security and SSI beneficiaries by mail starting in early December about their new benefit amount.
For many beneficiaries, the 1.3% COLA increase comes as a surprise as it is a lower bump than last year's 1.6% COLA increase for the year 2020. As a result, the 1.3% COLA increase for 2021 will mean only an increase of $20 per month, raising the average monthly payout to $1,543 for 2021 from $1,523 in 2020. The average COLA over the decade had been 1.52% increase, with the highest being 2.8% rise that went into effect in January 2019. Yet, for the years January 2011 to January 2016, there had been no COLA increases.
In spite of the lower COLA increases, the FICA tax rates had risen to 15.3% from 12.4%. Among this, the beneficiaries will have to pay 6.2% FICA taxes into their Social Security system. So, as the total income subjected to these FICA taxes increases, the maximum benefit also increases. For 2020, the maximum benefit was $3,011, whereas for 2021 it will be a rise of $137 making it a maximum of $3,148.
Notification of COLA increases
If you are a beneficiary, you would receive notification from Social Security indicating your new benefit amount in early December. However, you can also receive your notification amount for the COLA notice online through your personal Social Security Number. You can follow this link to create and access your account: https://www.ssa.gov/myaccount/
For Medicare recipients, information about Medicare recipients will be accessed through the link www.medicare.gov. If you are a Social Security or SSI beneficiary receiving Medicare, Social Security will not be able to compute your new benefit amount until after the Medicare premium amounts for 2021 are made public. Final 2021 benefit amounts will be communicated to beneficiaries in December through the mailed COLA notice and my Social Security's Message Center.
For more information, you can contact our social security attorneys for legal guidance.