Social Security Benefit Update for 2021

Social Security benefits represent a salient component of most retirees’ retirement income strategy. For most American retirees today the two most important sources of retirement income are withdrawals from their own retirement savings and their monthly Social Security benefit. As such, it is imperative to be aware of new developments with Social Security and its associated retiree healthcare program, Medicare.

With all the media attention and focus on the COVID-19 pandemic and November’s Presidential Election this fall, you may have missed the update on Social Security benefits and Medicare costs for the upcoming year. On October 13, 2020, the Social Security Administration announced that the cost of living adjustment for 2021 will be 1.3% for the70 million Americans who receive Social Security benefits, among the smallest adjustments ever for the program. For 2021 the average monthly Social Security benefit will increase by $20.00, from $1,543 to $1,563 a month.

In early November, Medicare cost increases for 2021 were also announced.  Medicare Part B, which covers physicians services, outpatient hospital services and other services not covered by Part A saw a 2.7% jump in the standard monthly premiums, to $148.50 a month.  Medicare Part A, which covers inpatient hospital stays, skilled nursing facilities and some home health care services, does not charge a premium for 99 percent of recipients because they have had 40 quarters of Medicare-covered employment.  The deductible amount that beneficiaries pay when admitted to the hospital has increased at a 5.4% clip, to $1,484 for 2021, however.

The meager increase in monthly Social Security benefits for retirees this year and higher increases for Medicare Part B premiums and Part A deductibles will mean that retirees’ own retirement savings will need to provide even more in the way of retirement income.  With interest rates near historically low levels, retirees may find that their fixed income investments will struggle to provide them with the returns needed to offset higher health expenditures in 2021.

Retirees or soon-to-be retirees who have concerns about making their retirement savings stretch further to cover the rising costs of retirement and healthcare are encouraged to contact Bollin Wealth Management at 419-878-3934 for a complimentary meeting to discuss your situation.