Retirement Social Security

2021 COLA Gives Modest Increase

Social Security beneficiaries will see a modest increase in the 2021 cost-of-living adjustment (COLA).

The 2021 adjustment of 1.3 percent will increase benefits for roughly 70 million Social Security beneficiaries resulting in an average increase of $20 per month for each recipient.1,2

This 1.3 percent increase may be viewed to pale in comparison to the previous years’ adjustments of 2.8 percent in 2019 and 1.6 percent in 2020. However, it’s important to keep in mind that this adjustment was designed to keep Social Security benefits in pace with inflation, tying the annual COLA to the increase in the Consumer Price Index (CPI). In broad terms, the CPI measures the price of consumer goods and how they’re trending in to evaluate the economy. In short, lower inflation numbers usually equals a modest COLA.1

There is also an increase for 2021 when it comes to Social Security taxes. While the tax rate will remain the same as in 2020, the income limits will change for 2021. A 6.2 percent Social Security tax (which employers match) will apply to income earned, up to $142,800 for 2021 – up from $137,700 for 2020. While this limit increases, so will maximum benefits. Maximum benefits will increase from $3,011 for 2020 to $3,148 in 2021.

Additional earnings limits have also increased for those still working and receiving Social Security benefits. Currently, those who are working and receiving benefits, but have not reached full retirement age (FRA), are able to earn up to $18,960 – a $720 increase from the 2020 limit. After the earning limit, $1 is deducted from the earner’s payment of benefits for every $2 that exceeds the limit.  For those that have reached FRA and still want to work, there is an earnings limit of $50,520 – an increase of $1,920 from 2020 limits. For these workers, no benefits are withheld, regardless of income.

While this information comes as hot press from the Social Security Administration (SSA), it is important to note that the SSA is not able to calculate benefits until Medicare premiums are announced. With this in mind, they have stated that beneficiaries will not receive their new benefit amounts until early December.1

When Medicare changes for 2021 are released, Social Security and Social Security Income beneficiaries will receive a notice of benefit changes directly from the Social Security Administration via mail. Beneficiaries will also be able to view their COLA notice via their My Social Security account online at

To view the full Social Security 2021 Update Factsheet, CLICK HERE.

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Investment advisory services are offered through BCJ Capital Management, LLC., an SEC Registered Investment Adviser.  Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.


1- [10/16/20]

2- [10/16/20]

BCJ FG 20-138

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