Knowing how to keep a close eye on your budget is a valuable lesson for anyone to learn. Whether you’re a small business owner, caring for a big family, or just starting your career—it’s important to know the ins and outs of your bank account and expenses. That’s why Social Security recipients need to be aware of the changes that are coming down the pipeline this year. If you haven’t already heard the news, here’s a quick recap.
2021 Social Security Updates
First off, the good news: We’re seeing a 1.3 percent bump in 2021 for both Social Security and Supplement Security Income (SSI). The monthly benefits increase may not sound like much, but it’s actually a key part of keeping your income on-par with the ever-rising Consumer Price Index. The percentage was calculated after a review of how the index has increased from September 2019 to September 2020.
Of course, there’s another side to this equation. The people who contribute to Social Security benefits are expected to face an increase of their own. Their income tax will rise to 3.7 percent, with their maximum taxable earnings set at $142,800. Put another way, your wages (up to that $142,800 dollar amount) are going to be subject to the Social Security tax. (This is a $5,100 jump from the previous year.)
Contributors to Social Security should also note that any tax taken beyond $142,800 of earnings can be put toward a tax return credit. This might happen because of having multiple jobs and being on multiple payroll setups.
Benefits and Taxes for Social Security
Now, back to the 2021 updates for retirees. To get more specific, that 1.3 percent increase on your Social Security retirement benefits will, on average, equate to an extra $20 per month. That takes the average benefit total up to $1,543. Another bright note: The 2021 tax rates for Medicare and Social Security will remain steady with last year’s percentage.
But this doesn’t necessarily make your Social Security income simple and straightforward. Being able to analyze your annual budget from every angle will help ensure that you’re on track to live within your means and continue to save for those rainy days. And if you need help reviewing those numbers for your tax responsibility too, then please know that our team would be happy to help!
Need Help Running the Numbers?
Every new year brings new changes. When you need a little outside support to make sure your finances are in order—and that you don’t overlook anything when filing your tax return—then NSO and Company is here for you. It can be challenging to stay up-to-date when rules and regulations are constantly being revised. But leave those worries to us. We can do the tricky work for you and help give you peace of mind.
To learn more about our process, get started on a tax review, or to schedule a consultation to talk through things in more detail, please don’t hesitate to give us a call at (317) 588-3131. We look forward to hearing from you!