If 2020 has taught us anything, it’s that we should expect the unexpected. In this year alone, we’ve dealt with a global pandemic, a presidential election, and a financial crisis, just to name a few. Many people are hoping for a fresh start with the new year, especially those who are approaching or in retirement. While we don’t know exactly what 2021 will hold, here are a few things we can expect in regard to retirement.
One positive change coming to Social Security in the coming year is the 1.3% benefit increase starting in January due to the cost-of-living adjustment. Retired and disabled workers can both expect larger checks. The 1.3% increase will also apply to those who receive Supplemental Security Income, with the average couple receiving $16 more a month. The maximum amount of earnings subject to the payroll tax will rise to $142,800. Those preparing for retirement should remember to apply for Social Security four months before you wish to begin receiving it.
The COVID-19 pandemic has made health care an even more important issue for many people. “In 2020, many insurers have provided premium relief and/or voluntarily waived cost-sharing for COVID-19 treatment for their members due to excessive profits and low medical loss ratios during the pandemic.”2 Although Medicare premiums were expected to be very high in 2021, they will be less than previously expected.1 “The standard premium for Medicare Part B is $144.60 per month in 2020 and $148.50 in 2021, though it could be higher depending on your income.”3 Don’t forget to apply for Medicare three months before your turn 65.
Tax rates in 2021 will remain constant, with the top tax rate at 37% for individual taxpayers. However, “the standard deduction, tax bracket ranges, other deductions, and phase-outs will increase.”4 Tax credit adjustments have been made due to inflation with a maximum credit of $6,728 for three or more children and the credit for qualified adoption expenses increasing to $14,440.4 The exemption level for estate tax will also increase in the coming year.4 There are many other tax changes on the horizon that you should discuss with a financial professional to determine how they could impact you.
As we said, we can’t predict what the future will hold, but preparing can only help. If you felt unprepared or overwhelmed for all this year brought, now is the time to take your financial future seriously. Take the time to educate yourself on all the financial changes in store for 2021 and speak with a financial professional who can help determine the best course of action for your situation. Registering for a complimentary ARI course is a great place to learn more!
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