Updates and Changes to Social Security and Medicare in 2021
If you’re retiring or planning your retirement in 2021, you should know how the 2021 changes to
Social Security and Medicare may affect you.
Some are simple updates:
• The maximum annual income subject to FICA tax will be $142,800.
• Medicare Part B premiums will increase about 2.7%.
• The cost of living adjustment for Social Security benefits is + 1.3%, the average annual COLA
since 2009, but half the average since 1975.
Other changes can wreak havoc with your retirement if not planned for.
As Part B premiums change, so does the Income-Related Monthly Adjustment Amount (IRMAA) surcharge
that affects what higher-earning recipients pay for Part B and Part D premiums. This surcharge is
based on your modified adjustment gross income and can be substantial.
Both the MAGI bracket ranges and the surcharge amounts have changed for 2021. The income is based
on your 2019 return, per the “two-year lookback” rule.
Modified Adjustment Gross Income Range % Increase in Part B and D Premiums
- $0 to $88,000
- $88,001 to $111,000 35%
- $111,101 to $138,000 87%
- $138,001 to $165,000 139%
- $165,001 to $499,999 192%
- $500,000 and higher 209%
If married filing jointly, incomes to $499,999 are doubled and incomes $500,000 and higher are
multiplied by 150%.
And:
If you are receiving Social Security and have not achieved your full retirement age, you may earn
up to $18,960 in work-related earnings if you reach full retirement age in 2022 or later. Once you
earn more, your benefits will be reduced by $1 for every $2 you earn beyond that
limit.
If you reach full retirement age in 2021, your earnings limit is $50,520 for the months prior to the month you reach full retirement age. For this year, $1 is deducted from benefits for every $3 earned beyond the limit. These adjustments can be impactful for your retirement and underscore the importance of working with a financial professional who can help retirees and pre-retirees better prepare for Medicare and Social Security related challenges in 2021 and beyond.
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