# Opinion: Social Security and Medicare: Key things to know in 2021

While the minimum retirement age remains 62, the full retirement age (also known as FRA) will increase to 66 years and 10 months in 2021 for those born in 1959. This is increasing by a month a year, meaning that if you were born in 1960, your full retirement age in 2022 would be 66 years and 11 months, and a full 67 years for those born in 1961.

Bigger Social Security checks

The cost-of-living adjustment bumps up payments 1.3%, a figure based on inflation for the year ended Sept. 30, 2020. That means the average recipient will get $1,543 a month, up from $1,523 in 2020. For an average retired couple who both collect benefits, the payment will rise to $2,596, up $33 a month. For workers who paid the most into the system when they were working—and thus will take the most out—the maximum monthly check for an individual retiring at full retirement age will rise to $3,148.

Meantime, if you’re on Social Security but still working, and younger than age 65, you can earn up to $18,960 before your benefit is temporarily withheld.

Read: Will COVID-19 impact Social Security’s finances?

Higher tax ceiling

The actual payroll tax rate of 12.4% remains unchanged, but the amount subject to that tax—which is split between employee and employer—is rising. In 2021, the first $142,800 of income is subject to that tax rate, an increase of 3.7% from the 2020 figure of $137,700.

Contribution limits

• The 401(k) contribution limit is $19,500.

• The 401(k) catch-up contribution limit is $6,500 for those age 50 and older.

• The IRA contribution limit is $6,000.

• The IRA catch-up contribution limit is $1,000 for those age 50 and older.

Medicare

Health care costs continued to rise, in some cases sharply, in 2020. It’s more important than ever to understand how you can squeeze every last dime out of your benefits. Here’s are some important things to know:

Part A (provides inpatient/hospital coverage). Very few Medicare beneficiaries have Part A premiums since they have at least 40 quarters of Medicare-covered employment, but they still pay deductibles of course. The limit rises in 2021 to $1,484, an increase of $76. Part A inpatient hospital deductible covers beneficiaries’ share of costs for the first 60 days of Medicare-covered inpatient hospital care in a benefit period.

Part B (provides outpatient/medical coverage)’s standard monthly premium will increase $3.90 to $148.50. The annual deductible for Medicare Part B beneficiaries is $203 in 2021, an increase of $5 from 2020 (these figures are higher for beneficiaries who earn more—see this table).

Part D (provides prescription drug coverage) will increase its standard deductible $10 to $445. The out-of-pocket spending threshold is rising $200 to $6,550. This is a big deal, notes GoodRx, which tracks pharmaceutical prices, because “once you’ve spent that amount out of pocket in 2021, you leave the coverage gap and enter into the catastrophic phase, where you only pay a small fraction of drug costs.”

Part D includes one change that could help millions of Americans: It will cap certain insulin drugs at $35 for a month’s supply. Since some 25% of Americans age 65 and older have diabetes, this will be significant and “could save up to $446 a year in out-of-pocket costs” for insulin. Visit Medicare’s site to learn what’s available in your state.

The coronavirus has meant a boom in telehealth. Medicare benefits will now allow you to get medical or health services that generally occur in person. CMS (the Centers for Medicare and Medicaid Services) adds that you can now be covered for “certain virtual services, like E-visits. See pages, 39, 48 and 50 here.

What will Biden do?

The president-elect, who will be sworn in on Jan. 20, says Social Security benefits should be expanded. To pay for this, he’s proposing to hike payroll taxes on people earning more than $400,000 a year. Both chambers of Congress would have to go along, however, and while Democrats control the House, control of the Senate hinges upon two runoffs on Jan. 5. Republicans only need to win one to maintain control.

Biden has also said that the eligibility age for Medicare should be lowered five years to age 60. This would run into a buzz saw of resistance not just from Republicans, but also the hospital industry. Why? Because hospitals make a lot less money from Medicare patients than from patients who are covered by their work health plans. The industry fears a lower Medicare age could mean billions in lost revenue.