Question: Brian from Hillsboro: My mom (who lives on Social Security) is wondering if her check will increase in 2021? Also, are there any other important updates to know for next year?
A: Yes, your mother will see a bit of an increase to her Social Security benefit in 2021. But she shouldn’t get her hopes up too high – it’s a cost of living boost of a mere 1.3% (though this is bigger than zero, which has happened in the past). To put real numbers to it, if we assume your mother currently receives the average monthly benefit of $1,503, it will increase by about $20 to $1,523.
But, as the saying goes, what the right hand gives the left hand takes. The base Medicare Part B premium will increase in 2021 by 2.7% ($3.90) to $148.50 a month (high earners will pay even more). Therefore, because Part B premiums are typically deducted from Social Security checks, your mother won’t likely see that full 1.3% Social Security increase. Instead, if we use the example above, she would get a net increase of about $16 a month.
As for other financially important 2021 updates, contribution limits for 401(k)s and 403(b)s are staying the same ($19,500 if you’re younger than 50; $26,000 if you’re 50 or older). And IRA contribution limits are also staying static ($6,000 if you’re younger than 50 with an additional catch-up contribution of $1,000 if you’re 50 or older).
The Simply Money Point is that it’s always worthwhile to stay up to date on the changes the government makes year-to-year to certain programs and retirement rules. This way, it’s easier to adjust a budget and/or retirement contributions.