7 Changes Coming to Social Security and Medicare in 2021

Senior couple
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This story originally appeared on NewRetirement.com.

To say that Social Security and Medicare are important to the financial well-being of seniors would be an understatement. Among eligible beneficiaries, 62% rely on Social Security income for more than half of their income. And almost everyone who is eligible uses Medicare to help fund their health care after 65.


Any increases in benefits or payments are important. Recently, both Social Security and Medicare made the following major announcements about benefits for 2021.

1. Social Security benefits will increase by 1.3% in 2021

Social Security recipients
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Every year, the Social Security Administration (SSA) announces a cost of living adjustment (COLA) for Social Security benefits. Over the last 40 years, benefit increases have been as high as 14.3% and as low as zero.

In 2019, benefits increased by 2.8%. In 2020, the benefits increase was 1.6%.

Due to low inflation, this year the SSA announced the boost for 2021 is a modest 1.3%. That will result in an average increase of about $20 a month for the 70 million seniors who collect benefits.

You can model your Social Security benefits increase as part of your overall retirement budget in the NewRetirement Retirement Planner.

2. The Social Security increase will not cover rising senior expenses

Unhappy senior woman
Asier Romero / Shutterstock.com

Social Security benefit increases are based on an inflation calculation called the Consumer Price Index for Urban Wage Earners and Clerical Workers that measures the wages of clerical and wage workers in cities. This way of measuring inflation doesn’t take into account costs specific to seniors. And if Social Security does not keep pace with the actual rise in prices, then beneficiaries can afford less.

A 2018 report from the Senior Citizens League found that the purchasing power of Social Security benefits has declined by a whopping 34% over the last 18 years. In addition, “since 2000, COLAs increased benefits a total of just 46 percent, while typical senior expenses have jumped 96.3 percent.”

Mary Johnson, Social Security policy analyst for the Senior Citizens League, told CNBC the following: “The flat COLAs make it more difficult for retirees to be able to afford to pay for Medicare Part B premiums, which are going up about three times faster than the annual benefit increases.”

To rectify this oversight, the Senior Citizens League advocates a different inflation measure for seniors, the CPI-E (CPI for the elderly) that would account for rising costs specific to seniors like prescription drug costs, food and senior housing.

3. The Social Security full retirement age will increase — again

Concerned senior retiree
fizkes / Shutterstock.com

The full Social Security retirement age (the age at which you can collect 100% of your monthly benefit) will increase again in 2021, this time by two months.

The full retirement age will increase in 2021 to 66 years and 10 months, and again in 2022 to 67 years.

Workers may still claim Social Security benefits as early as age 62, but the amount of their benefit will be 29.17% less than their benefit if they wait till full retirement age to claim.

4. The wealthy can get a higher maximum Social Security benefit

Rich ex-wife
H_Ko / Shutterstock.com

In 2021, well-to-do retirees can net quite a bit more each month. According to the SSA, the maximum monthly benefit at full retirement age will increase to $3,148 in 2021, a monthly increase of $137 from 2020.

That’s an extra $1,644 a year for lifetime upper-income earners during retirement.

On the other hand, the maximum amount of wages taxed for Social Security will be $142,800 in 2021, up from $137,700 in 2020.

5. Fallout from the presidential election

President-elect Joe Biden
lev radin / Shutterstock.com

The election of former Vice President Joe Biden to the presidency in November may have a significant impact on the future of the Social Security and Medicare programs.

For example, switching Social Security COLA benefits to the CPI-E calculation, the plan supported by the Senior Citizen’s League, was a part of President-elect Biden’s platform. Biden has also outlined a slate of very specific initiatives to “preserve and strengthen Social Security” and to “protect and strengthen Medicare” among other policy proposals designed to benefit older Americans.

6. Medicare costs to rise

Syda Productions / Shutterstock.com


Medicare cost increases for 2021 include:

  • The standard monthly premium for Medicare Part B will be $148.50, up from $144.60 in 2020.
  • The annual deductible for Medicare Part B (covering some costs related to physicians, outpatient hospitals, home health, medical equipment and other services not covered by Part A) will be $203 — a $5 increase.
  • The Medicare Part A inpatient hospital deductible will be $1,484 — a $76 increase.

7. Limited Medicare coverage options

Home health aide
Monkey Business Images / Shutterstock.com

Medigap plans C and F were not available to new enrollees in 2020.

Starting in 2020, the Medicare Supplement plans that pay the Medicare Part B deductible were no longer available to newly eligible enrollees. This change is part of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

Do Social Security and Medicare changes mean it’s time to update your retirement plan?

Senior African American couple at home
Monkey Business Images / Shutterstock.com

It is important to keep your retirement plans up to date.

You may want to update your:

  • Social Security benefit amount
  • Optimistic and pessimistic inflation rates
  • Medical inflation rates
  • Anything else in your plan that may have recently changed

The NewRetirement Planner makes it easy to create and maintain a detailed and reliable plan.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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