Each year, the Social Security Administration tweaks the amount it pays to recipients to push back on inflation. Inflation decreases the value of money, so these “cost of living adjustments” (a.k.a. COLAs) is vital to ensure that social security beneficiaries have enough money to get by as inflation goes up.
COLAs are kind of like pay raises for retirees. Around 70 million Americans receive Social Security benefits and COLAs are key to sustaining them financially.
2021 COLA Adjustments
This week, the SSA announced that social security payments will increase by 1.3 percent in 2021. Although this is the lowest COLA since 2017, when beneficiaries saw a mere 0.3 percent boost to Social Security, it falls in line with the average of the last decade (1.4 percent). Between 1999 and 2009, though, beneficiaries saw a 3 percent bump each year.
The average annual Social Security recipient got $1,523 per month in 2020, totaling $18,276 for the year. With the 2021 COLA increase, beneficiaries will receive $1,543 per month and bring in an additional $240 across the year.
Inflation is expected to be above 2 percent in 2021, driving down consumer purchasing power. That increase in inflation, coupled with rising Medicare costs, means that a meager 1.3 percent bump might not be enough to help beneficiaries sustain themselves.
The Senior Citizens League, a nonpartisan senior advocacy group, is calling for Congress to pass a 3 percent COLA increase to help shield seniors during an uncertain economic time. Accounting for inflation across the last 20 years, the League projects that this COLA increase will be the lowest in history.
“People who have been receiving benefits for 12 years or longer have experienced an unprecedented series of extremely low cost-of-living adjustments,” Mary Johnson, a Social Security policy analyst for The Senior Citizens League, said in a statement.
It remains to be seen if Congress will enact any changes, but for now, retirees should expect only a moderate bump to payments in 2021.