The Social Security Administration announced a 1.3 percent boost to monthly Social Security and Supplemental Security Income (SSI) benefits for 2021. The increase is based on the rise in the Consumer Price Index over the past 12 months ending in September 2020.
The increased payments will go to more than 64 million Social Security beneficiaries beginning in January 2021. Additionally, increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries will begin on December 31, 2020.
Social Security beneficiaries may be disappointed by this modest bump compared to the 1.6 percent increase beneficiaries saw in 2020 or the 2.8 percent boost in 2019. The calculation of Social Security increases is tied to the increase in the Consumer Price Index (CPI). In broad terms, the CPI measures the price of consumer goods and how they are trending. In short, lower inflation numbers usually equals a modest COLA. You can learn more about COLA on the Social Security Administration’s website.
For those contributing to Social Security through wages, the maximum income subject to Social Security tax increases 3.7 percent this year, to $142,800, up $5,100 from 2020. This amounts to $8,853.60 in maximum annual employee Social Security payments. Any excess amounts paid due to having multiple employers can be returned to you via a credit on your tax return.
If you like numbers, the chart below is for you! It reflects the magnitude of the Social Security program, including the number of recipients and the average benefits received.
Andrea L. Blackwelder, CFP®, ChFC, CDFA® and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with the Denver Financial Advisors at Wisdom Wealth Strategies.