No social program in the U.S. holds more importance to the financial well-being of seniors than Social Security. Nearly 65 million people receive a Social Security benefit monthly, and more than 46 million of them are retired workers. Of these retirees, more than 3 in 5 rely on their monthly payouts to account for at least half their income. 
Social Security is also a dynamic program as it undergoes a number of changes every year. Updates were unveiled by the Social Security Administration (SSA) a few weeks ago. Here's a look at several changes happening to Social Security in 2021:
1. Recipients will receive more money
October is the most important time for Social Security recipients, primarily because the SSA announces the cost-of-living adjustment (COLA) for the upcoming year.
For 2021, the administration announced a 1.3% COLA, which for the average retired worker is going to translate into an extra $20 a month, working out to an estimated payout of $1,543 a month by January 2021.
2. The full retirement age is inching higher
In 2021, the full retirement age (FRA) is going to inch up higher by two months to 66 years and 10 months for people born in 1959 (i.e. beneficiaries who can become newly eligible next year). Claiming benefits prior to reaching your FRA equates to accepting a permanent reduction to your monthly payout. Conversely, deferring benefits until after 66 years and 10 months for workers born in 1959 can increase retirement benefits substantially.
Social Security's FRA will peak at age 67 in 2022 for anyone born in 1960 or later.
3. High earners can expect to pay more taxes
Changes to the Social Security program do not just affect people currently receiving benefits. One of the biggest updates in 2021 is an increase to the payroll tax earnings cap.
The payroll tax (OASDI tax) is the primary means of funding Social Security. Revenue is brought in by applying a 12.4% tax on earned income (wages and salary, but not investment income) up to $137,700, as of 2020.
In 2021, all earned income up to $142,800 will be taxable, representing an increase of $5,100. This means an increase in payroll tax of up to $632.40 between employee and employer next year.
4. SSA increases maximum benefits
The SSA capped monthly retirement benefits at $3,011 for claimants of full retirement age in 2020. For 2021, the maximum payout at FRA is increasing to $3,148 a month. That's an extra $1,644 a year for those who paid the most into the Social Security system.
5. Updated Social Security statements are available.
As 2019 wages and earnings have been recorded, estimated benefits have been updated. Login to my social security to create a profile and view your current or estimated retirement benefits and verify all information, including earnings history, is accurate.
If you are working still, we encourage you to check your statement yearly to make sure your earnings are recorded correctly. The statement will also help your prepare and plan for your financial future more prudently.
Claiming strategies can still be complex with the constant rule changes of Social Security. If you need assistance analyzing and optimizing your benefits in relation to your retirement income plans, please contact us at (561) 416-2992 or email us at email@example.com and we will set up a call to discuss your income planning needs.
For more information on updates from the Social Security administration, please click the fact sheets below.