For the retired employees of our nation, no social program is more important than social security. Every month, approximately 65 million people collect a payment, which includes more than 46 million retired employees. Without guaranteeing this monthly benefit, the elderly poverty rate would be closer to 40%, according to an analysis by the Center for Budget and Policy Priorities (it is less than 9% with Social Security payments).
But you may be surprised to learn that not all workers who receive retirement benefits are actually retired. Some continue to work, either part-time or full-time, collecting their retired worker benefits from the program. If you are one of these people, or you claim benefits too soon to stay employed in some capacity, then you should be aware of some changes occurring in 2021.
Retirement income test exemption limits are changing
Perhaps the biggest change involves the retirement earning test. Retirement income testing allows the Social Security Administration to withhold the benefit of some or all early retirees if they earn above a predetermined income threshold. By retiring early, I am talking about receiving a monthly payment to a retired employee who is yet to reach his full retirement age.
For example, retired employees who collect a benefit and will not reach full retirement age in 2020 are allowed up to $ 18,240 ($ 1,520 a month) for a full year with no benefits. . If they exceed this amount, then $ 2 each. The result of $ 1 in income earned over this limit is removed from profit. For retirees who have not reached their full retirement age in 2021, the limit is increasing to $ 18,960 annually or $ 1,580 a month.
The same is true for early retirees who will reach their full retirement age in 2021. Early filers who complete their early retirement age next year will be allowed to earn $ 50,520 or $ 4,210 per month, before the $ 1 is left behind in benefits. Every $ 3 in earnings above this income limit. This is an increase from the $ 48,560 full-year limit in 2020.
It is worth pointing out that the retirement earnings test no longer applies after you hit your full retirement age, even if you start taking your benefits. Additionally, the prescribed benefits are not lost forever. Rather, they return as higher monthly benefits after completing full retirement age.
Social Security payrolls come due to tax deferral
With Social Security beneficiaries still choosing to work, they may see an increase in payroll taxation subject to them in 2021.
As you already know, 12.4% of payroll on earned income (wages and salaries) accounted for the lion’s share of revenue collected by Social Security – $ 944.5 billion of $ 1.06 trillion in 2019. For a second-round stimulus with Congress, President Trump signed an executive order in August allowing payroll taxes for workers with incomes of up to $ 104,000 between Sept 1, 2020 and December 31, 2020. Has been postponed. This was done to temporarily increase workers’ take-home pay while navigating their way through Coronovirus Disease 2019 (COVID-19) -industrialized recession.
While not all states or businesses opted in to this four-month payroll tax deferral, 2021 may come as quite a surprise to some working Americans who have pocketed a little extra since the beginning of September. You see, since President Trump’s order is a deferred and not a payroll tax holiday, deferred payroll tax has to be paid in the program. This means that working Americans have accepted this deferred in 2020 which was postponed in 2021. This can definitely be a setback for senior citizens who meet their combined salary / salary and benefits.
Higher earners may be overpaid
High-income workers who are collecting Social Security benefits may need to open their wallets a little wider in the coming year.
The above payroll tax applies to income earned in 2020 between $ 0.01 to $ 137,700. Since 94% of working Americans will earn less than $ 137,700 this year, they will pay Social Security on every dollar they earn. Meanwhile, income earned in excess of $ 137,700 has been exempt from payroll tax.
In 2021, this payroll tax income cap is increasing from $ 5,100 to $ 142,800. While this would have no effect on 94% of working Americans, they would need higher earners to pay up to an additional $ 632.40 next year (assuming they are self-employed).