Today, the Social Security Administration announced a modest 1.3% cost-of-living adjustment (COLA) for 2021.
This increase follows a 1.6% increase for 2020, a 2.8% increase for 2019, and a 2% increase for 2018.
The 1.3% raise applies to everyone who receives Social Security benefits, including Social Security retirement, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI) benefits.
How Much will Your Social Security Check Increase?
The average Social Security check for disabled workers was $1,261 a month in 2020. Next year's increase will raise the average monthly payment by $16 to $1,277.
For people receiving SSI, the maximum federal payment will grow with the adjustment from $783 per month in 2020 to $794 per month in 2021.
To determine your new benefit check amount, take your 2020 monthly benefit and multiply that times 1.013. This will give you an estimate of your check amount for 2021.
You should receive notification from Social Security indicating your new benefit amount in early December.
Most recipients can also view their COLA notice online through their My Social Security account.
How is Social Security COLA calculated?
The yearly COLA amount is based on increases in the Consumer Price Index (CPI) which measures the cost of inflation for goods and services, but not health care.
Most people receiving Social Security are retired or disabled. For most, health care is their biggest expense, and it is one of the fastest rising costs in America.
Premiums for Medicare Part B are automatically deducted from the checks of many Social Security recipients. Medicare Part B premiums have not yet been announced for 2021, but are expected to rise. This will offset the increase which is meant to offset consumer price increases but doesn't take health care expenses into account.
Some are proposing that Social Security begin using a price index for the elderly, called CPI-E, that would take into account items such as health care costs, which have increased at a greater rate than inflation overall.
Health care cost increases have outpaced COLA increases for years. Medicare Part B premiums are going up three times faster than the annual benefit increases. In addition, the CPI also does not take into account the rising cost of prescription drugs.
But so far, no action has been taken on this proposal.
Changing to the CPI-E is included in the Social Security 2100 Act aimed at fixing Social Security put forward by Rep. John Larson, D-Conn. It is also included in Democratic presidential nominee Joe Biden's plans to reform the program.
The Senior Citizens League is currently lobbying Congress for an emergency 3% COLA for 2021.
When will Social Security checks increase?
Increases will go into effect on December 31, 2020, and will be seen by SSDI recipients on the first check of January of 2021.