Social Security COLA Boost 2021

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Discover the 1.3% COLA boost for Social Security in 2021 and its impact on your benefits. Learn more about safe money alternatives today! Starting on January 1, 2021, Social Security beneficiaries will see a boost in their benefits. Over 70 million recipients of Social Security and Supplemental Security income will receive a COLA bump of 1.3% in their monthly payouts. This increase is lower than the increase of 1.6% for 2020 by 0.3%. It’s also 0.1% lower than the average COLA of 1.4% that recipients have received over the last decade. The average Social Security recipient will see a monthly bump-up of about $20 overall. In other words, that will be an increase from an average benefit of $1,523 in 2020 to $1,543 in 2021. How Are Social Security Benefits COLAs Calculated? The COLA adjustment that is applied each year is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This consumer price index is calculated by the Bureau of Labor Statistics (BLS). If the CPI-W increases more than 0.1% year-over-year between the third quarter of the previous year and the third quarter of the current year, Social Security will raise benefits by the same amount. The precise calculation is fairly complex. It may result in a new benefit amount that differs slightly from the amount that is derived by multiplying the new COLA by the current benefit amount. 2021 Social Security Withholding Rates and Limits In 2021, the Social Security tax of 6.2% will be levied on all earned income up to $142,800. This marks an increase of $5,100, or 3.7% from the limit of $137,700 in 2020. Any amount that is earned above this limit is exempt from this tax. The tax rate of 6.2% will remain unchanged, just as it has for the past several years. Those who are self-employed are still required to pay the full amount of 12.4% on all of their net earnings up to the limit. But just as the maximum amount of money that is subject to the Social Security tax has increased, so will the amount of the maximum possible Social Security benefit, from $3,011 in 2020 to $3,148 in 2021. 2021 Changes for Taking Benefits While Still Working What if you are collecting Social Security benefits while you are still working? A percentage of your benefits may be withheld until you reach your full