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Small COLA for Social Security Set for Next Year

Category: Financial and taxes in retirement

October 15, 2020 — Social Security recipients will see a small Cost-of-Living Adjustment (COLA) next year. Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2019 through the third quarter of 2020, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 1.3 percent COLA for 2021. The monthly average retirement benefit will be $1,543 in 2021, an increase of $20.

Employee and employer will each continue to pay 7.65% for Social Security and Medicare. Individuals making more than $200,000 in unearned income also pay an additional 0.9% in Medicare taxes. Maximum income for Social Security taxes will increase from $137,700 to $142,800 in 2021. There is no maximum on the Medicare portion.

Maximum earnings exemption increases. People receiving benefits who have not yet reached full retirement age and continue to work will see a modest increase in their earnings cap exemption, from $18,240/yr. to $18,960/yr. One dollar in benefits will be withheld for every $2 in earnings above that level. The exempt limit for those who work in the year they attain full retirement age goes from $48,600/yr to $50,520/yr in 2021 (($1 is withheld for every $3 over that limit). Beginning the month they hit full retirement age nothing is withheld.

For further reading:

Social Security 101: So You are Turning 65

Posted by Admin on October 15th, 2020

3 Comments »

  1. Quite honestly, I did not think we would receive any COLA this year. I am grateful for any increase. I do realize that it is less than many hoped for, every little bit helps. One cannot expect to come ahead when relying on Social Security, maybe just able to keep up, or barely so.

    by Jennifer — October 16, 2020

  2. I am surprised that SS is not going up more because where I live, the cost of food has skyrocketed. If there was ever a year that we needed an large increase, it is this year. The cost of getting food delivered for those of us who cannot go into a store is expensive. Any small gain is now eaten up by the increase in cost of Medicare. I would love to get back to working, but until this pandemic is over, it is impossible for so many seniors. I am very disappointed that there is not more help for seniors who have never asked for any help from the government their entire lives. We need help now.

    by Maimi — October 16, 2020

  3. We moved several unrelated comments about various grocery/other delivery systems to a new post to stay on topic. See https://www.topretirements.com/blog/financial/walmart-vs-amazon-deliver-service.html/

    by Admin — October 18, 2020

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