Long Island Elder Law & Estate Planning

retirement planning 3

At the end of each year, the Social Security Administration releases updated parameters for the upcoming year. That time is upon us, and they have made the figures available.

We will share them in this post, and in the near future, Medicare will follow suit. Come back to visit us, because we will pass that information along as well when it becomes available.

Cost of Living Adjustment (COLA) for 2021

Seniors that are receiving Social Security benefits will receive a 1.3 percent increase next year. The calculations are based on the Consumer Price Index that is maintained by the United States Department of Labor.

During some years, they reach the conclusion that no COLA is warranted. Most seniors would probably disagree, and when there are increases, they don’t amount to much.

For example, this year the average monthly Social Security benefit is $1523. If you add a 1.3 percent increase, you are looking at $1543, and you can’t do much with five bucks a week.

Plus, as you will see in the next section, seniors never really get the full increases when cost-of-living adjustments are made.

Medicare Part B Premiums

The Medicare program is broken up into Sections A-D. Part A is the hospitalization piece, and Medicare eligible seniors can use their Part C benefit to defray the cost of more comprehensive private insurance. Medicare Part D is the prescription drug component.

Part B pays 80 percent of covered treatments that are provided by doctors and other health care providers, and the beneficiary has to pay the other 20 percent. There is a monthly premium for this coverage, and it goes up a bit every year.

Updated figures for 2021 will be revealed in November, but to give you an idea, the premium went up by about nine dollars in 2020. The Part B premium is automatically deducted from your Social Security direct deposit.

There is a “held harmless” provision. If the cost-of-living adjustment does not cover the Part B premium increase in a given year, the beneficiary would not receive a reduced benefit.

This year, the is a cap on the Medicare Part B premium increase in light of the economic impact of the pandemic. It can be no more than 25 percent of what would have been applied in an ordinary year.

Maximum Taxable Income for Early Benefit Recipients

You can choose to accept your Social Security benefit when you are 62 years of age. This can sound like a very appealing way to go, but you would be sacrificing quite a bit.

The benefit would be reduced by somewhere between 25 percent and 30 percent of the full benefit that you would receive if you wait until you reach the true retirement age.

This age is 66 for people that were born in 1954 and earlier years, and it then goes up by two months per year until 1960. People born during that year and later years become eligible for a full benefit when they celebrate their 67th birthdays.

In addition to the reduction in the benefit, there is another reason why you may want to steer clear of the early option.

If you are still working, you are penalized by one dollar for every two dollars that you earn above a prescribed limit that is established by the Social Security Administration.

This year, the limit is $18,240, and the SSA has announced that it will go up to $18,960 in 2021.

Attend a Free Seminar or Webinar

We conduct webinars and seminars periodically to provide educational opportunities to members of our community. The sessions are free, and you can learn a lot if you join us, so this is a great way to invest a little bit of your spare time.

You can see the dates obtain more information if you head over to our webinar/seminar page.

Need Help Now?

We are here to help if you are ready to put an estate plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 631-265-0599.

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About Mark S. Eghrari, Estate Planning Attorney

Mark S. Eghrari is an attorney in private practice in Smithtown, New York. He has been in practice since 1988. Mark S. Eghrari provides extensive estate and tax planning services to individuals and businesses. Mr. Eghrari’s primary focus is helping clients avoid probate, minimize or eliminate Federal and State Estate taxes and protect their assets from the high cost of nursing care, if they become ill.