People receiving Social Security will get a small raise next year. The cost-of-living adjustment (COLA) for 2021 has been announced, and it will be 1.3%.
For retirees who depend on Social Security, the COLA can be a big deal. Here’s what this announcement might mean for your clients.
How Much More Will Seniors Get?
The Social Security Administration says that COLA notices will be sent out during December. If beneficiaries want to know their new benefit amount a little sooner, they can long into their My Social Security account to get the information in early December.
To give an idea of what a 1.3% increase might look like, a fact sheet from the Social Security Administration has also provided some average figures.
- Before the 1.3% COLA, the average monthly benefit for all retired workers was $1,523. After the 1.3% COLA, it will be $1,543.
- For couples both receiving benefits, the average monthly benefit before the 1.3% COLA was $2,563. After the 1.3% COLA, it will be $2,596.
This means that the average individual might expect about $20 more each month, and the average couple might expect about $33 more each month.
The benefit increase is not the only Social Security adjustment for 2021. Other changes include the maximum taxable earnings, which will increase from $137,700 to $142,800, and the maximum Social Security benefit for a worker retiring at full retirement age, which will increase from $3,011 a month to $3,148 a month.
Is This Increase Normal?
The COLA is based on the Department of Labor’s Consumer Price Index (CPI-W). The CPI-W rises with inflation, and the Social Security COLA is supposed to reflect this higher cost of living.
This has been an unusual year, and you might be wondering if the pandemic and economic problems have impacted the COLA. However, although an increase of 1.3% might not seem like much, it’s fairly typical.
According to CNBC, the 1.3% increase is about what The Senior Citizens League anticipated. It’s also close to the average cost-of-living adjustment since 2010, which is 1.4%.
What About Medicare Part B Premiums?
Medicare Part B premiums are often deducted from Social Security benefits. This means that the COLA increase that retirees receive can be eaten up by premium increases so that retirees don’t actually get any more spending money. However, the “hold harmless” provision means that a retiree will not receive less than he or she did in the previous year, even if the premium increase is greater than the COLA increase.