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Social Security Administration Fact Sheet for 2021

Every October, Social Security Administration (SSA) announces annual changes that will take effect in January of the following year. These changes include cost-of-living adjustments (COLA), changes to disability and retirement benefit amounts, and adjustments to maximum taxable earnings. Here, we discuss the changes that took effect in January in 2021.

Cost-of-living adjustments are based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined until the third quarter of the current year. The CPI-W is determined by the Department of Labor’s Bureau of Labor Statistics.

The purpose of a COLA is to ensure that the purchasing power of SSA’s disability or retirement benefits is not diluted by inflation. In 1972, Congress enacted a COLA provision as part of that year’s amendments to Social Security; automatic COLA began in 1975. Prior to the amendment, benefit amounts only increased when Congress enacted special legislation.

In 2021, the COLA increased by 1.3%. The Social Security employee tax rate remained the same at 7.65% (including Medicare) as did the self-employed tax rate at 15.30%. Maximum taxable earnings increased to $142,800. In order to collect disability or retirement benefits, an individual needs to earn a certain number of work credits to qualify. In 2021, one work credit equals $1,470 in income, and you can only earn a maximum of four work credits per year.

Substantial gainful activity (SGA) is the threshold used to determine whether someone meets SSA’s definition of disabled. For non-blind individuals, the SGA limit is $1,310 per month. For blind individuals, the SGA limit is $2,190 per month.

Supplemental Security Income (SSI), designed to help the most destitute individuals, has strict income and resource limits. Although some states choose to increase the amount of SSI payments, they are not required to do so. In 2021, the federal portion of SSI payments for a single individual is $794 per month and $1,191 per month for couples. The resource limits are unchanged and remain $2,000 for an individual and $3,000 for couples.

Full retirement age (FRA) continues to play an important role in determining Social Security retirement benefits. If you wait until you reach FRA to start collecting retirement benefits, there is no limit to how much income you can earn each year. If you start collecting before you reach FRA, the most you can earn is $18,960 per year; for every $2 you earn over that amount, $1 is withheld from your benefits. If you start collecting the year you reach FRA but before you have officially reached FRA, the most you can earn is $50,520; for every $3 you earn over that amount, $1 is withheld from your benefits until the month you reach FRA. The maximum amount anyone can collect in retirement benefits in 2021 is $3,148 per month.