Social Security benefits are expected to rise slightly in 2021, according to the Social Security Administration, which announced the increase today mainly due to the economic impact of the coronavirus pandemic.
The meager cost-of-living adjustment (COLA) of 1.3% will begin on December 31, 2020, for the more than 8 million people receiving SSI benefits and in January 2021 for more than 64 million Social Security beneficiaries. This will amount to an extra $20 per month for the average retiree who receives a check of $1,523 each month.
According to the SSA, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $142,800. The earnings limit for workers who are younger than full retirement age will increase to $18,960, while the limit for people reaching their full retirement age in 2021 will increase to $50,520, with no limit on earnings for people who are at the full retirement age or older in 2021.
The 1.3% COLA is the smallest since 2017 and is below the average COLA of the past 10 years of approximately 1.52%, according to AARP, The largest increase in the past 10 years was 2.8% in January 2019.
Unfortunately, the new COLA may be effectively wiped out for nearly 43 million beneficiaries because of premium increases for Medicare Part B. For others, according to an article on Oct. 13 in USA Today on the COLA, the Medicare offset would make any adjustment marginal. “Medicare premium increases are generally adjusted so they don’t reduce Social Security benefits.”
Also, USA Today reports that over the past 20 years, “COLAs increased a total of 53% while the cost of goods and services typically purchased by retirees jumped nearly twice as much – 99.3%,” leaving Social Security recipients with 30% less buying power.
For more information, go the Social Security Administration’s site at https://www.ssa.gov/cola/.