How Have Social Security Benefits Changed in 2021?
Social Security benefits have changed in several ways in 2021. Whether you are considering filing for benefits or are currently receiving SSI or SSD, it is vital to be aware of the changing state of the program.
Cost-of-Living Adjustment (COLA) Increase
The most immediately pertinent benefit for those already receiving Social Security benefits is an upward Cost-of-Living Adjustment (“COLA”).
First, however—what is the Social Security COLA?
Since the mid-1970s, increases in Social Security benefits have been tied to increases measured in the US Consumer Price Index for Urban Wage Earners and Clerical Workers.
The general idea of the cost-of-living adjustments to Social Security benefits is to ensure that the monthly payment will be sufficient to meet the basic needs of recipients.
The COLA increases ensure that retirees retain purchasing power, in other words.
The Consumer Price Index utilized by the Social Security Administration in its COLAs is heavily tied to inflation. It is particularly affected by increases in the cost of such daily expenses as gasoline.
What has the COLA been for 2021?
Nothing terribly dramatic, unfortunately.
Social Security and Supplemental Social Security beneficiaries have received a 1.3% COLA for 2021.
While that may represent a dramatic downgrade from what may come in 2022, it is still a helpful increase for beneficiaries in 2021.
Maximum Taxable Earnings Increase
Likewise, the maximum earnings taxable for Social Security benefits also increased in 2021. From a maximum Social Security earning of $137,700 in 2020, the maximum earnings in 2021 increased to $142, 800.
What does this mean?
While the 6.2% tax rate on Social Security earnings remained unchanged from 2020, a wage-earner has seen more income subject to that tax in 2021.
In 2020, the wage-earner’s income would be taxed only up to $137,700, with any income earned above that level remaining untaxed.
In 2021, as much as $142,800 has been taxed for Social Security purposes.
Medicare earnings are taxed without limitation.
What is the justification for this taxable maximum limitation?
In 1937, payroll taxes were applied only to the first $3,000 in earnings by American workers. Congress has raised the taxable maximum (or “tax max”) on an irregular basis over the years since, justifying each increase with the need to keep the Social Security system well-lubricated and to fund benefits increases for middle- and higher-income earners.
Increases in the “tax max” have generally been tied to average wage increases in the American workforce.
Full Social Security Retirement Age Rose In 2021
Social Security benefits can first be claimed at age 62. However, the monthly benefit paid to those retiring “early’ at that age are greatly reduced from those paid to those waiting to claim their benefits at the “full” retirement age.
What is that age?
For everyone born after 1960, full retirement is reached at age 67.
If you were born prior to 1960, your full retirement age will depend upon your date of birth.
Further, waiting until age 70 to claim Social Security benefits will result in a 32% higher monthly benefit payment.
The “full retirement age is not the only change implemented in 2021, however. There is also now a larger reduction in the amount you are paid if you claim benefits prior to full retirement age.
Claiming benefits at age 62 results in a nearly a 30% reduction in monthly payments, while claiming those same benefits at 70 will result in the receipt of 128% of their monthly benefit amount.
This is an enormous gap in benefit percentage. Those considering retirement thus will need to calculate retirement age extremely carefully moving forward.
Social Security Credit Earning Minimums Increased
In 2021, the amount of income needed to earn Social Security credits, or “Quarter of Coverage,” increased slightly from 2020.
In order to claim Social Security, you must have accumulated a minimum of 40 such “credits” over the span of your working life, with a maximum accumulation of 4 per year possible.
The credit or Quarter of Coverage (“QC”) is simply representative of the amount of Social Security income earned prior to retirement. In order to draw from the Social Security system, you must have contributed a minimum amount to it over your working life, in other words.
The QC has been automatically adjusted each year since 1978 according to changes in the national wage average index.
The current 2021 QC is $1,470, up from $1,410 in 2020.
This means that you must earn more this year to earn Social Security credits than you did last year.
Social Security Disability Benefits Payment
In addition to the SSI age benefit changes discussed above, Social Security Disability benefits payments also adjusted upward in 2021 as a result of the COLA.
For example, disabled beneficiaries who received $1,277 per month in 2021 as compared to the $1,261 per month received in 2020. An example of families including a disabled earner, spouse, and one or more children who received $2,224 per month in 2021 relative to the $2,195 received in 2020.
While this is not an enormous improvement, any increase is useful to those receiving it.
What Is Expected Moving Forward?
Given that the Social Security COLA is tied to inflationary expense increases, it is predicted that the COLA may increase as much as 6.2% in 2022.
This is due to the high inflation that 2021 has brought to the US. Forbes (see the link above) reports that July 2021, saw prices for necessary goods 5.4% higher than they were in July 2020.
Forbes reports that the Wage Index utilized in the COLAs is up more than 40% in 2021.
While a 6.2% increase in 2022 is a vast increase over the 1.3% COLA in 2021, it may, Forbes reports, still not be sufficient to maintain seniors’ buying power given the skyrocketing costs of healthcare and other necessary expenses.
What does this mean?
It means that it is more important than ever to stay on top of your budgeting and spending, as well as your retirement timing and other key decisions.
How Can a Florida Social Security Attorney Help You?
Whether you need assistance calculating your optimal retirement age or with the Social Security Disability claims and appeals process, an experienced Florida Social Security attorney can assist you in maximizing your benefits.
An Orlando Social Security Attorney can, first, help you to understand what your benefits eligibility is.
It is not easy to obtain SSD benefits. A majority of initial applications are rejected, and the appeals process from such decisions can be lengthy and exhausting.
First, however, a Social Security Disability attorney will increase the odds that your application is not among those rejected.
An experienced SSD attorney will explore your medical condition and its severity relative to the SSA’s list of impairments, as well as your ability to perform “Substantial Gainful Activity” and your work history and ability.
An attorney will then discuss with you your medical basis for SSD eligibility and walk you through your options.
A good Florida Social Security attorney will educate you, in other words.
If you are eligible for benefits, a Social Security attorney will prepare and file your application, mediate and facilitate post-filing SSA medical records request responses and physical exam requirements as needed.
A Florida Social Security Attorney will file a Request for Reconsideration of any denial you receive within the 65-day deadline for doing so.
Your attorney will represent you at your appeals hearing and ensure that the right information is brought to the attention of the Administrative Law Judge (“ALJ”) presiding over the hearing.
Should that hearing prove unsuccessful, a Florida disability attorney can further appeal your case to the Social Security Appeals Council in Virginia and, if necessary, file suit in Federal Court.
Social Security Benefits Changes: The Bottom Line
The bottom line with regard to the changes to Social Security benefits in 2021 is that they will not be the last.
Ongoing COLAs are statutory realities of the Social Security landscape, even as politicians muddle through the possibility of a depletion of the Social Security Trust and various potential remedies to the situation.
It pays to stop on top of these annual adjustments. It pays to consult an experienced Orlando, Florida Social Security attorney if you are considering retirement or have become disabled.
The Law Offices of Shea Fugate, PA offers free consultations and friendly service.
Contact us now to begin your conversation.