In a previous blog we informed that Social Security beneficiaries would see a 1.3 percent benefit increase in 2021, but that is not going to be the only change in 2021. Other facts and figures will change and these changes will also change requirements to be eligible for certain Social Security programs.
One thing that will not change is the tax rate. As is the case in 2020, the Social Security tax rate will remain 7.65 percent for employees in 2021 and will remain 15.30 percent for self employed individuals. Below is a better description of the Social Security tax rate.
The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below). The Medicare portion (HI) is 1.45% on all earnings. Also, as of January 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes. The tax rates shown above do not include the 0.9 percent.
SSDI Program
A Social Security Disability Insurance (SSDI) beneficiary or a claimant applying for SSDI benefits is limited in how much they can earn while working to meet the technical rules of the program, which is known as the Substantial Gainful Activity (SGA) threshold. In 2021 SGA will increase to $1,310 from $1,260 in 2020. For beneficiaries and claimants who are found to be blind the SGA numbers are different, $2,190 in 2021 compared to $2,110 in 2020. Another change in the program will be with the trial work period. The trial work period allows a beneficiary to attempt to work for up to 9 months, out of a total of 60, without work income impacting benefits, but there is an income limit and those will increase to $940 in 2021 compared to $910 in 2020.
SSI Program
There will also be changes with the Supplemental Security Income (SSI) program. This program provides monthly benefits to those who have been found disabled or older Americans who meet certain low income and asset requirements. The maximum monthly benefit in 2020 is $783 and that will increase to $794 in 2021. The SSI program limits income and assets to $2,000 for a single individual and $3,000 for a married couple in 2021 to remain eligible for benefits. This amount is unchanged from 2020.
Maximum Benefit Amount
No matter how much an individual may pay in Social Security taxes during their working career, Social has set a maximum Social Security benefit amount for retirement and SSDI benefits. That amount in 2020 is $3,011 and will increase to $3,148 in 2021.
Below is a description of how Social Security decides on the Cost-Of-Living Adjustment (COLA) each 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.
