The Social Security Administration (SSA) made two decisions regarding earning limits and cost of
living increases that positively affect monthly benefits.
Earnings Limits Adjusted
Individuals who work part or full time and are receiving Social Security benefits before reaching their
full retirement age (FRA) are subject to the retirement earnings test. If they make more than the annual limit, they will receive less in monthly benefits.
In 2020, the limit was $18,240 per year and $48,600 per year for those nearing and reaching their
FRA. The SSA increased the minimum for 2021, so if a worker doesn’t reach FRA any time this year, they may now earn up to $18,960 without having their benefits reduced. If they earn more than that amount, their payments will be reduced by $1 for every $2 they earn over the annual limit.
If the worker reaches their FRA in 2021, their earnings have a different limit — $50,520. For every $3
they earn over that, their benefits will be reduced by $1.
The reduction is not permanent. The SSA will recalculate each retiree’s benefit amount once they
reach their FRA, and then they’ll start receiving larger checks to compensate for the amount withheld.
After they reach their FRA, benefits will not be reduced, regardless of income.
Cost of Living Increase
The SSA’s cost of living adjustment for 2021 is 1.3 percent for Social Security and Supplemental
Security Income benefits, which assist low-income individuals who are disabled but who haven’t worked enough to qualify for Social Security Disability Insurance.
The Social Security Act ties the annual cost-of-living adjustment to the increase in the Consumer Price
Index as determined by the Department of Labor’s Bureau of Labor Statistics.
The SSA also increased the maximum amount of earnings subject to the Social Security tax from
$137,700 to $142,800.