Social Security Tips for October, 2020 – 2021 COLA

Cost-of-Living Adjustment (COLA) Information for 2021

The 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2020. (Note: some people receive both Social Security and SSI benefits) Read more about the Social Security Cost-of-Living adjustment for 2021.

The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $142,800.

The earnings limit for workers who are younger than “full” retirement age (see Full Retirement Age Chart) will increase to $18,960. (We deduct $1 from benefits for each $2 earned over $18,960.)

The earnings limit for people reaching their “full” retirement age in 2021 will increase to $50,520. (We deduct $1 from benefits for each $3 earned over $50,520 until the month the worker turns “full” retirement age.)

There is no limit on earnings for workers who are “full” retirement age or older for the entire year.

Read more about the COLA, tax, benefit and earning amounts for 2021. (2021 Fact Sheet PDF)

The Q&A for the month:

Question: A gentleman started collection at FRA. He is working and contributing to FICA. Our question is; will his benefits be adjusted and when?

Answer: Each year we review the records for all Social Security recipients who work. If their latest year of earnings turns out to be one of their highest 35 years, we refigure their benefit and pay them any increase due. This is an automatic process, and benefits are paid in December of the following year. For example, in December 2020, they could get an increase for their 2019 earnings if those earnings raised their benefit. The increase would be retroactive to January 2020.

Check out our Receiving Benefits While Working web page for all the details.

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