Social Security checks to increase by 1.3% in 2021

A view of a Social Security Administration during the coronavirus pandemic on May 12, 2020 in Queens borough of New York City.

Come January 2021, the roughly 70 million people who receive Social Security will see a 1.3% increase in their benefit payments to account for the rising cost of living, the Social Security Administration announced Tuesday.

That means the average monthly check for retirees will increase by $20 to $1,543, the agency said. However, the extra $20 a month for many seniors on low fixed incomes may not go as far they need, given the rising cost of groceries and other expenses as a result of the pandemic.

Meanwhile, the average monthly check for those receiving Social Security disability benefits will rise by $16 to $1,277.

The maximum Social Security check retirees can receive every month -- if they start collecting benefits at their full retirement age -- will go up by $137 to $3,148. The retirement age is now 67 for those born in 1960 or later.

The agency also announced new taxable income thresholds on which American workers will owe the 6.2% Social Security payroll tax.

Starting next year, the first $142,800 of one's wages will be subject to that tax, up from $137,700 currently.

For those who are self-employed, they would owe 12.4% in payroll taxes up to that amount because they would owe both the employee (6.2%) and the employer (6.2%) portions of the payroll tax. But they will get to deduct the employer portion on their federal income taxes.

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