Social Security Announces Modest 2021 Benefit Increase
Social Security benefits will rise 1.3 percent in 2021, the agency announced. Such a modest cost of living adjustment (COLA) — $20 a month for the average beneficiary — normally would translate into meager 2012 benefit gains once Medicare beneficiaries back out higher 2021 monthly premiums for Part B of Medicare.
The Centers for Medicare & Medicaid Services (CMS) has not yet announced the 2021 Part B premium. It is $144.60 a month this year for most people and would be expected to eat up much of the 1.3 percent Social Security COLA.
Last fall, however, Congress enacted a new rule limiting Part B premium increases to 25 percent of the rise that CMS otherwise could levy. In their annual outlook report last spring, Medicare trustees projected the 2021 Part B premium would rise to $153.30, an increase of $8.70. Under the new rule, CMS would be able to pass on only 25 percent of this amount, raising the Part B premium to roughly $147.40.
The COLA announcement also triggered other key program metrics for next year:
The wage ceiling subject to payroll taxes will rise to $142,800 from $137,700.
The earnings test limits that reduce benefits for recipients with wage income will rise to $18,960 ($1,580 a month) from $18,240 ($1,520) this year for people who have not yet reached full retirement age. For those who have, the limits will rise to $50,520 ($4,210 a month) from $48,600 ($4,050) this year, for those earning wages during the year they reach full retirement age. Wages earned after full retirement are exempt from earnings-test benefit cuts.
The agency’s COLA fact sheet lists other 2021 changes.