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What Are the Changes Expected for Social Security in 2021?

Social Security

When it comes to benefit programs, social security retirement and disability benefits provide the much-needed economic support to Americans who are retired from service and those who are disabled. As a medical review company experienced in reviewing medical records for disability attorneys, we understand that the SSDI (Social Security Disability Insurance) program provides coverage for a number of disabilities. It is estimated that each month approximately 65 million people receive social security, and more than 46 million of them are retired workers. Moreover, more than three among five of these people depend on their social security check for at least half of their income.

Social security programs undergo changes every year and these are announced in a timely manner by the SSA (Social Security Administration). Here are the changes we can expect in the program for the year 2021.

  • COLA increase by 1.3%: The higher payments will start on December 31, 2020 for more than eight million SSI beneficiaries. For more than 64 million people receiving social security, the higher payments will start in January 2021. For SSI beneficiaries, the maximum payment will increase from $783 per month in 2020 to $794 per month in 2021. Couples will receive $1,191 per month next year, from $1,175 this year. Actual payments for SSI beneficiaries could be higher because some states give additional money for this program.
  • Disability income limits will increase: Around 9.7 million beneficiaries receive monthly payments from the Social Security Disability Insurance Trust. Income limits for these beneficiaries will increase further by 2021. Non-blind disabled beneficiaries can receive up to $1,260 per month in 2020 without stopping their social security payments. In 2021, this threshold will increase by $50 a month to $1,310. Disabled beneficiaries who are not blind can receive up to $600 extra a year without losing their benefits. Visually impaired, disabled beneficiaries can earn up to $2,190 a month in 2021, i.e., $80 a month higher than the 2020 threshold without having their benefits stopped.
  • Higher taxes for higher income earners: The SSA announced that the maximum income subject to the old age, survivors, and disability insurance tax will increase to $142,800 in 2021. This income limit was $137,700 in 2020. Employees with wages up to or above the maximum in 2021, will pay $8,853.60 in tax (tax rate – 6.2%), with the employer paying an equal amount.
  • Full retirement age will increase: In 2021, the full retirement age is going to increase by two months, to 66 years and 10 months for people born in 1959. The full retirement age is the age when you can get 100% of your monthly payout, as calculated by your birth year. If you claim benefits before reaching your full retirement age, you will receive a permanent reduction to your monthly payout. On the other hand, waiting until full retirement age can increase your retirement benefits. In 2022, the full retirement age for social security will be 67 for anyone born in 1960 or later.
  • Increased monthly benefit for higher wage earners: The SSA has capped monthly retirement benefits at $3,011 for persons of full retirement age in 2020, and the maximum payout at full retirement age is increasing to $3,148 a month in the year 2021 – an increase of $1,644 for wealthy employees. However, to receive this amount, employees must have waited until their full retirement age; they must have worked at least 35 years; they must have reached or surpassed the maximum taxable earnings cap in each of the thirty-five years the SSA considers when determining a person’s retirement benefit.
  • Withholding threshold will increase for early filers: The SSA’s retirement earnings test is used to withhold some or all of the benefits of an early filer if he or she earns above a pre-determined income threshold. In the year 2021, this income threshold will be higher. Early filers who won’t reach their full retirement age in 2020 can earn up to $18,240 a year at the rate of $1,520 a month. After that, $1 will be withheld from their benefits for every $2 in earnings above this threshold. Next year, those who won’t reach full retirement age can earn up to $18,960 annually before “withholding” starts. However, early filers who reach their full retirement age in 2021, will be allowed to earn up to $50,520 or $4,210 per month before $1 in benefits is withheld for every 3 dollars earned above this threshold ($160 a month increase from the year 2020). The retirement earnings test is not applicable once a person has reached his/her full retirement age, irrespective of when they claimed benefits. The withheld benefits are returned to recipients as a higher monthly payout after reaching full retirement age.
  • To qualify for a retirement benefit, you have to earn more: To receive social security retirement benefits, you must have earned 40 lifetime work credits – a maximum of 4 credits can be earned each year and these are awarded based on a person’s income in a given year. In 2020, workers need $1,410 in earned income to receive one lifetime work credit. They will have to earn $5,640 ($1,410×4) in earned income to receive the maximum 4 credits. In the year 2021, a person must earn $1,470 to get one lifetime work credit, or $5,880 for the full year to earn the maximum 4 credits.

Whether retirement benefit, or disability benefit, beneficiaries will be looking to maximize it. Social security attorneys can provide the right counsel regarding the claim filing process. When it comes to disability benefits, medical chart reviews become vital to prove the disability and its debilitating effect on the person. Social security disability attorneys work closely with their clients to understand the nature of the disability and determine whether it will be covered by the SSA. They will also represent the client in court, in case the disability application is denied.

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