As elder law attorneys, we keep a finger on the pulse of government programs that seniors rely on, and the existing parameters are updated annually. At the time of this writing, Medicare has not released their revised figures, but we can pass along some news from the Social Security Administration.
Cost of Living Adjustment (COLA)
Prices tend to rise, and when all or part of your income is fixed, this is a source of concern. Fortunately, Social Security usually provides cost-of-living adjustments.
Next year, the monthly Social Security benefits will go up by 1.3 percent. To give you an idea of how this translates into dollars and cents, the average benefit in 2020 is $1523 a month. A 1.3 percent increase would boost the average monthly benefit by 20 bucks.
Maximum Taxable Income
The old-age, survivors, and disability insurance (OASDI) tax is the deduction that funds the Social Security program. There is a limit to the amount of income that can be taxed for this purpose.
In 2020, the maximum taxable income for OASDI is $137,700, and the limit is going up to $142,800 in 2021.
This limit is positive on one hand if you are in this high income bracket, but on the other hand, it leads to a benefit limit. The maximum Social Security benefit this year is $3011, and it will be $3148 when the new year rolls around.
Early Social Security Benefit Earning Cap
You become eligible for your full Social Security benefit when you are 66 if you were born in 1954 or any earlier year. Someone that is born in 1955 will become eligible two months after their 66th birthday. The age goes up by two months each year in this manner until 1960.
People that were born in 1960 and any year after that can receive their full Social Security benefit when they are 67 years of age. We should point out the fact that these parameters could change via legislative mandate, but this is the arrangement that has been in place for quite a while.
If you are willing to forgo your full benefit, you can choose to submit your application for Social Security when you are 62 years old. The reduction is between 25 and 30 percent of your full benefit, and that is significant, especially when you consider the fact that the benefits are modest.
This reduction is a major disincentive, and there is another one that takes this option off the table if you are working full-time.
You are penalized if you accept an early benefit and you earn more than a certain amount of money. This year, the cutoff is $18,240 a year, and next year it will go up to $18,960. The benefit is reduced by one dollar for every two dollars that you earn above this amount.
Medicare Part B Premium Increase
As we stated in the opening, the Medicare numbers have not been released for 2021, but there is some relevant information to pass along. A stopgap federal budget measure was passed in March that impacted the Medicare parameters for 2021.
Part B is the portion of the program that pays for treatments that are administered by doctors and other types of health care providers. You pay a monthly premium for this coverage, and it goes up every year.
This budget was created in light of the economic impact of the pandemic. It limits the Part B increase to no more than 25 percent of what it would have been if there was a normal economy.
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