Social Security benefits are likely an important part of your retirement plan. The Social Security Administration has released its annual updates for 2021, which could affect amounts you pay in or benefits you receive.
How much will Social Security benefits increase in 2021?
Benefits increased by 1.3% to adjust for cost-of-living expenses this year, with the estimated average monthly benefit for retired individuals in 2021 being $1,543 per month, an increase of $20/month from 2020.
What is Full Retirement Age for those turning 62 in 2021?
For individuals born in 1959 who will be turning 62 this year, the full retirement age is 66 years and 10 months. Looking forward, for anyone born in 1960 or later, the full retirement age is 67. It's important to understand your Social Security options because if you claim benefits at any point prior to reaching your full retirement age, then you're accepting a permanently reduced monthly benefit.
What if I file for benefits early but still plan on working?
Social Security has an earnings test for anyone who is receiving benefits before full retirement age but is still working. If you are not reaching your full retirement age in 2021, you can earn up to $18,960/year before your benefits would start being withheld. If you are reaching full retirement age in 2021, you can earn up to $50,520 before benefits would start being withheld. The earnings test no longer applies once you reach full retirement age.
What about taxes?
High earners can expect to pay more in taxes. Earned income up to $142,800 is taxable, an increase of $5,100 from 2020.
Anything else I should know?
While the program may need to change so it can continue to pay full benefits and remain on solid footing, Social Security is not going away. Even if no changes are made, Social Security will still pay benefits, but adjustments may need to be made to prevent potential reductions in benefits years into the future. Your decision about when to file for benefits should be based on your own personal situation and not based on fears over the future of the Social Security program, so talk with your financial advisor about what may be appropriate for your situation.