Social Security and Supplemental Security Income (SSI) benefits will increase by 1.3% in 2021, according to a recent announcement by the Social Security Administration (SSA). Approximately 70 million Americans receive at least one of these benefits, and the average retiree will see a $20 increase to their benefits.
This comes as part of the Social Security annual cost-of-living adjustment (COLA), which is based on increases in the Consumer Price Index. The coronavirus pandemic has caused inflation, and the price of everyday goods has risen; the average price of food rose by 3.9% in the past year.
Other changes include an increase to the maximum earnings subject to the Social Security tax, to $142,800 from $137,000, a 3.5% increase. Tax rates, however, will remain the same for employees and the self-employed.
Additionally, the retirement earnings test exempt amount has risen for those under full retirement age to $18,960/yr from $18,240. For those who are reaching full retirement age in 2021, the test exempt amount has been raised to $50,520/yr from $48,600. There is no earnings limit for people who have been full age or older for the entire year.
