October 27, 2020
Hoping for a 2021 Social Security Boost? Find Out If It’s in the Cards
The numbers are in! Check out if 2021 will bring a boost to your Social Security check or Medicare rates—and what that might mean for your retirement savings.
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A fresh new year can mean a whole new you—and a whole new Social Security check. Each year, the Social Security Administration has the opportunity to give recipients a cost-of-living adjustment (COLA) to fund the rises that inflation can bring to their everyday costs. This year’s numbers are finally here, and there’s a good chance you’re going to be getting a little extra income in 2021.
Check out some of the changes you can expect to see with your Social Security and/or supplemental security income (SSI) in the coming year:
- Your Social Security or SSI check will have a 1.3% boost at the start of 2021. For the average retiree, that’s about an extra $20 every month, or an average monthly payout of $1,543.
- The max taxable earnings subject to Social Security will rise 3.7%, from $137,700 in 2020 to $142,800 in 2021. That increase is designed to help keep Social Security solvent. About 6% of people are expected to hit that new cap, and they can expect to pay about $632 more in payroll taxes for 2021.
- Your Social Security retirement earnings test thresholds will increase modestly in 2021 from $18,240 to $18,960.
- Social Security raised the maximum payout at full retirement age from $3,011 to $3,148, or an extra total of $1,644 per year.
The good news? You’ll be getting more money on your Social Security check. The not-so-good news about that COLA increase? Following a year marred by a pandemic that crippled the economy and the ever-rising cost of healthcare in the US, it’s understandable to wish that bump were a little (or a whole lot!) bigger.
Inflation Impacts Your Cost-Of-Living
Part of the reason that 1.3% boost might seem low is that COLA figures are generally guided by inflation. Our current period of relatively low inflation overall should mean that the 1.3% boost should cover all your bases. Unfortunately, though, we’ve historically seen Social Security COLA rates underestimate the true cost of retiree spending inflation.
This year, for instance, the U.S. Bureau of Labor Statistics reported that in 2020, categories like food, home, and medical care services have inflation to thank for a 3.9% price increase, higher than this year’s 1.3% Social Security COLA.
Inflation increases tend to sneak up on consumers. You might not notice that your weekly trip to the supermarket jumps up by a few bucks, or might not think much of a $3 increase to your monthly home insurance bill. But put together, all those increases quickly add up over time, especially when your income remains relatively static.
That makes retirement saving even more crucial. Discovering your Retirement Score can help you see how big of an impact price increases are making on your nest egg. But it can also connect you to important resources that can help you save. By utilizing services like a Hippo or Lively HSA card that can drastically drop prescription drug and other healthcare spending, getting cash back on groceries from places like Sam’s Club and Walgreens, or shopping around on Matic to find more affordable home insurance, you’re getting ahead of inflation without having to make a dent in your savings.
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Medicare Rising Premiums
You may have seen firsthand how inflation—or life’s curveballs—can make your spending increase overnight. Maybe you headed into retirement thinking Medicare would cover all your healthcare costs, but one osteoporosis diagnosis later and you’re paying sky-high out-of-pocket costs for a medication that drastically improves your quality of life. Or perhaps you started off 2020 on a high note, but had to quit the part-time job you relied on for padded income in order to help the grandkids get through a year of virtual schooling.
COLA figures don’t always take into account all those ways that senior spending can skyrocket overnight. But Silvur does. By using the app to calculate your Retirement Score, you aren’t just able to see how long your savings will fund your retirement—you’re also able to play around with those numbers and plug in potential adjustments to see how changes to things like your healthcare costs or part-time employment would impact your score. That way, you’ll be able to come up with actionable steps you can take to boost your nest egg and feel more secure about your spending and saving habits.
For instance, even if you’ve managed to remain relatively unscathed throughout the tumultuous 2020, you might want to calculate your Medicare costs in Silvur to factor in the changes that 2021 will bring to Medicare benefits. Because guess what? There’s going to be a few of those, too. Medicare changes are announced a little later than Social Security adjustments, typically in early November. So far, just the Medicare Part D figures have been released. But based on history and current political discussions about next year’s Medicare numbers, it’s possible to make some projections about what 2021 will bring:
- Most people don’t pay a Part A premium, since you paid into it while you worked. But if you do pay one, your cost is projected to go up. If you paid into Medicare between 7.5 and 10 years, your premium will likely rise from $252 per month in 2020 to $263 in 2021. If you worked less than 7.5 years, you’ll go from paying $458 per month to paying $478.
- Part A deductibles are projected to increase from $1,408 to $1,452.
- Part B premiums and deductibles haven’t been finalized, but are expected to rise slightly. The 2021 deductible might be higher than 2020’s $198, and the premium is projected to be $153.30, a 6% increase from the previous year.
- Medigap Plans C & F, which were popular supplemental coverage plans, will no longer be available for newly-eligible Medicare beneficiaries. (If you already had those plans, though, you’ll be able to keep them if you’d like.)
- The max out-of-pocket limit for covered services under Medicare Advantage plans had remained stagnant at $6,700 for several years, but will increase to $7,550 in 2021. (This number does not include prescription drug costs.)
Planning For Uncertain Healthcare Futures
If this feels like a lot of information being tossed your way, that’s because it is. Parsing everything that Medicare has to offer from year to year and finding the best coverage for you is a notoriously grueling task.
That’s especially true when you’re not exactly sure what your healthcare needs will be, or if you’re anticipating changes in the months ahead. Maybe you’re looking for short-term health insurance options until your Medicare kicks in. Or you might want to revamp your Medicare Advantage plans to extend your network or get better prescription drug coverage if your Parts A, B, or D just aren’t giving you the coverage you need anymore.
Make sure to shop around before Medicare open enrollment period ends on December 15. By comparing prices and plans, you’ll be able to find the right plan for you across carriers.