2021 Social Security COLA announced
The increase, despite coming in the midst of a global pandemic, might be one of the lowest ever.
The Social Security Administration announced the 2021 cost of living adjustment (COLA) will be 1.3%. Approximately 70 million Americans’ benefits are affected by the increase, though slight, in Social Security and Supplemental Security Income (SSI). In fact, the 2021 COLA may be the lowest ever, according to The Senior Citizens League.
Between 1990 and 2009, TSCL says, the average COLA was 3%, and before that, it was even higher. The COLA is calculated using the Consumer Price Index determined by the Department of Labor’s Bureau of Labor Statistics.
“People who have been receiving benefits for 12 years or longer have experienced an unprecedented series of extremely low cost-of-living adjustments (COLAs),” says Mary Johnson, a Social Security policy analyst with TSCL.
That includes this pandemic-ridden year. As 2020 comes close to its end, this year’s Social Security checks were “almost 20 percent lower than they otherwise would be,” TSCL says, thanks to low inflation rate adjustments.
Using inflation adjustments to set the Social Security COLA fails to account for the rapid increase in Medicare Part B premiums, TSCL says. Which is why people with lower Social Security benefits, it says, won’t see much of a boost in net Social Security income after deducting the Part B premium.
The table below shows an example of what new payments will look like, according to the Social Security Administration:
For workers, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase from $137,700 to $142,800.
Related: Take our editor’s Social Security quiz and see how much you really know
In a statement, AARP Chief Executive Officer Jo Ann Jenkins said, “Today’s announcement of a 1.3% COLA increase – while modest – is needed to help Social Security beneficiaries and their families try to keep up with rising costs. The guaranteed benefits provided by Social Security and the COLA increase are more crucial than ever as millions of Americans continue to face the one-two punch of the coronavirus’s health and economic consequences.”
For Social Security beneficiaries receiving Medicare, Social Security will not be able to compute their new benefit amount until after the Medicare premium amounts for 2021 are announced. That information will be available at www.medicare.gov.
Final 2021 benefit amounts will be communicated to beneficiaries in December through the mailed COLA notice and my Social Security’s Message Center. Most people who receive Social Security payments will be able to view their COLA notice online at www.socialsecurity.gov/myaccount.
To read more about how the COLA is calculated, see the Social Security Administrations COLA page.
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