Many Social Security recipients anxiously await news about the cost-of-living adjustment (COLA) that will be added to their direct deposits when a new year rolls around. The news has not been very good recently because the adjustment last year was just 1.3 percent, and it was 1.6 percent the previous year.
This is better than nothing, and zero is exactly what seniors received in 2010, 2011, and 2016, and the COLA was just .3 percent in 2017.
Fortunately, the cost-of-living adjustment is going to be considerably higher in 2021.
It is based on inflation, and we have seen a significant level of inflation in 2020. According to the current data, the adjustment for 2022 should be 6.2 percent. The last time it was higher than this was in 1982 when it was 7.4 percent.
Do All Seniors Qualify for a Social Security Benefit?
No, the benefit is not automatic for all older Americans. You gain eligibility when you pay taxes while you are earning income. Each year, you can earn as many as four retirement credits, and almost all workers get the maximum four credits each year because the requirements are modest.
When you have accumulated 40 credits, you will qualify for Social Security, and you will also be eligible for Medicare coverage.
When Do the Benefits Start Coming In?
The age of full eligibility is 67 if you were born in 1960 or a later year. It is 66 for people that were born in 1954, and it goes up by two months per year for individuals that were born after 1954 and before 1960.
This means that a person that was born in 1955 would become eligible two months after their 66th birthday, and it would be 66 years and four months for someone that was born in 1956.
You do not necessarily have to wait until you are eligible for a full benefit. An early retirement benefit can be accepted when you are 62, but it would be between 25 and 30 percent less than your full benefit. The exact amount of the reduction would be based on your birth year.
The reduced benefit is not an appealing prospect, and there is another downside. If you are working while you are accepting an early benefit, it would be reduced by a dollar for every two dollars that you earn that exceeds a set threshold. In 2021, it stands at $18,960.
If you want to maximize your benefit, you can delay the submission of your application after you are fully eligible. When you do this, you earn retirement credits that will increase your benefit when you start to receive it.
The benefit will go up by eight percent for every year that you delay, but there are no further increases after you are 70 years of age.
Can You Find Out How Much You Will Receive?
Yes, you can register your account on the Social Security Administration website, and you will be able to see an accounting of your earning history. Your benefit is based on the 35 years during which you made the most money.
To give you an idea, the average benefit this year is $1543 according to the American Association of Retired Persons (AARP). There is a maximum benefit that stands at $3140 a month this year for people that retire at their age of full eligibility.
The maximum amount of income that can be taxed for Social Security purposes is $142,800 during the current calendar year.
Schedule a Consultation Today!
It is important to take the right steps to prepare yourself to enjoy your retirement years, but after the active period starts to wind down, living assistance may be a factor.
Medicare does not pay for long-term care, so this is something that you should address in advance. Medicaid will cover the expenses, and it is possible to gain eligibility without losing anything in the process if you take the right steps.
If you are ready to implement a plan for aging with the assistance of a Hilton Head elder law attorney, we are here to help. You can send us a message to set up a consultation appointment, and we can be reached by phone at 843-815-8580.
- Why Would Someone Use an Irrevocable Trust? - February 1, 2024
- Breaking Down Barriers: Understanding Why Many Lack a Will or Trust - January 16, 2024
- Estate Planning Is Important for All Responsible Adults - January 4, 2024