For those who currently collect or are planning to collect Social Security, October 2020 was an important month. Each year, the Social Security Administration (SSA) releases the details on upcoming changes to Social Security benefits for the following year. Social Security benefits will look a bit different for most beneficiaries in 2021.

For Baby Boomers planning to retire, knowing the intricacies of Social Security benefits helps them to make educated decisions about claiming their benefits. The timing for filing for Social Security benefits plays a huge role in the amount of money you get each paycheck, so it’s important to stay informed. In the new year, knowing what to expect from Social Security changes will help you and your financial advisor come up with a plan to maximize your benefits.

Here are the changes for 2021

The Overall Social Security Benefits Amount INCREASES

Every year, Social Security benefits are adjusted to reflect the increase in the cost of living (COLA) for inflation. In 2021, benefits increased by 1.3 percent as the adjustment for COLA.

That may not seem like much, but every little bit helps. Now, the average recipient will receive $1,543 a month.  While that in itself is pretty positive, most beneficiary will see only a slight increase in their checks since the Medicare Part B premium increases from $144.60 to $148.50.  Higher income individuals pay a higher Part B premium that could further impact what is received after the adjustment for the COLA. 

Although the increase is supposed to compensate for inflation, the standard cost of living continues to rise in almost every part of the US at a much higher rate. Although pensions from private employers are becoming a thing of the past, some boomers are lucky enough to receive one. Most private pensions have no inflation protection so any increase in Social Security is welcomed!

The Social Security Income Tax Cap INCREASES

In 2020, people contributed 6.2 percent of their earnings to Social Security; however, income earned over $137,700 was not considered taxable, which benefits higher earners.

In 2021, we’ll see the ceiling amount for taxable income rise to $142,800. SSA experts predict that approximately 12 million of the 175 million workers who pay Social Security taxes will be affected.

Full Retirement Age Increases

The biggest change that seems to be flying under the radar is the increase in the full retirement age for claiming benefits.

If you are unfamiliar with the Full Retirement Age (FRA), it is the standard of measurement for when citizens should consider initiating their Social Security benefits. While you can technically start claiming anytime between 62 and 70 years of age, your FRA is the age where you won’t be penalized.

Starting January 2021, the full retirement age will increase to age 66 and 10 months for those who were born in 1959– a two-month increase compared to those who were born in 1958.

This increase in age is part of a long-term initiative to increase the FRA slowly from 65 to 67 years old. FRA gradually increased from 65 to 66 but stayed at 66 for 10 years for people born 1943 through 1954. For anyone born in 1955 through 1959, the FRA increases from 66 by adding two months every year to the FRA. Everyone born in 1960 or later will have an FRA of 67.

The Maximum Amount for Social Security Benefits RISES

With the 1.3 percent increase in Social Security benefits and higher taxable wages in 2020, there is also an increased maximum benefit for individuals reaching their FRA in 2021. In 2020, this amount was $3,011 per month or $36,132 per year. In 2021, we’ll see the cap increase to $3,148 per month or $37,776 per year. Of course, individuals who delay starting their benefits beyond their FRA and receive the 8% increase for every year they delay, will receive more than the maximum.

New Earnings Limit for Working Retirees Collecting Social Security Benefits

Continuing to work after retirement is a common choice for most recipients, who either want to have some additional income or who just want something to keep them busy.  Those who work while collecting Social Security benefits will be happy to hear about larger earning limits in 2021.

If you are younger than your FRA, you can now earn up to $18,960 per year without being penalized. For those who are past their FRA, there is no earnings limit.  The year you reach your FRA the amount still increases by $1,920 to $50,520 for the months before your FRA, and the penalty decreases to one dollar for every three dollars earned.

Social Security Benefits INCREASE for Those Collecting Disability

This change also affects those who are receiving a Social Security disability by increasing their payments by the 1.3 percent COLA.  The average monthly payment will increase by $16, which brings the total to $1,277 every calendar month.

How do these 2021 Social Security Changes Affect YOU?

As you can see, a lot of changes occur in 2021 for Social Security. And while these adjustments may not affect some Baby Boomers yet, they should be taken into account as you make your plans to start collecting Social Security. Knowledge of all the Social Security changes and what they mean will help you plan better for the future.

Now that you know what to expect from Social Security benefits in 2021, here are some tips to prepare for filing a claim:


Even with the full retirement age increasing, you should still wait until reaching it before claiming Social Security. Although you can claim as young as 62 years old, you will be penalized and permanently reduce your benefit.

Waiting until you reach full retirement age results in getting the full payout. Waiting even longer has additional advantages. Claiming for Social Security benefits between your full retirement age and age 70 awards you with an 8 percent increase annually

But don’t wait until after you turned 70 – that’s the maximum age to receive rewards for delaying Social Security benefits and you won’t see any additional advantages for waiting past then.


Most Baby Boomers worry that they won’t have enough money for retirement. And while it’s always a good idea to start saving money as early as possible, it’s never too late to begin. In fact, saving in your 50s comes with some perks that you may not have experienced when you were younger.

For example, most Baby Boomers tend to have less debt to take care of each month, like student loans, cars and significantly less owed for their homes. This means you may be experiencing more cash now than those in their 20s, starting out with no credit and some with crippling student loan debt.

Since you may have more supplemental income in your later years, your 50s are just as good as ever to start saving for retirement. You can save aggressively and should be able to retire modestly by the time you reach your FRA.

However, keep in mind that relying completely on Social Security benefits could become an issue. Even with the COLA increase in 2021, other programs like Medicare could consume your benefits. And don’t forget that the actual cost of living alone is increasing at a rate much faster than the COLA increase you’re seeing in 2021.

Meet with a Financial Advisor or Planner

Social Security benefits are a tricky beast, made even more confusing with fluctuating FRA’s and changes nearly every year. While most Baby Boomers are now starting to plan for retirement, reaching out to a professional can help you make the best decisions for maximizing your benefits.

There are multiple strategies involved when setting up a plan to claim benefits, and a professional will be able to assist you with selecting the best plan for your situation.

If you’re on the fence about claiming early or are unsure how the 2021 changes may affect you, then working with a financial planner could steer you in the right direction and set your mind at ease.