Social Security COLA (Cost of Living Adjustment) 2021 update

Currently 65 million Americans are on Social Security, receiving a Social Security benefit check every month. On a yearly basis the Social Security Administration can increase the amount that beneficiaries receive on there monthly benefit checks. This increase is called a Cost of Living Adjustment (COLA) which is based on a set of specific costs. In 2018 the COLA increased Social Security beneficiaries checks by 2.8% and in 2019 the COLA increased checks 1.6%. Although the cost of living adjustment has not been announced yet for 2020 it is possible, if the economy stays on its current trajectory that the COLA could be very small or even possibly 0% for 2021.Today we are going to discuss what is COLA, how Social Security COLA is calculated and how it could potently mean a 0% increase in Social Security Beneficiaries checks in 2021.

What is COLA and when does it change · COLA stands for Cost of Living Adjustment · It happens every year usually in October · Is a change in Social Security benefits to help recipients deal with the increasing cost of living · The COLA is important because as things get more expensive the increased Social Security benefit helps mitigate some of the increased cost of living · If the Social Security benefits stay the same seniors would be hit by both inflation and the overall increase of cost of living, especially for: – Healthcare – Housing – Prescriptions – These prices increase faster than general inflation · After a while their checks would be worth much less in real dollars. · Average monthly benefit is $1,503 a month · Before things like Medicare part B costs $144 a month. · Medicare Part D or Part C costs come out

How is COLA calculated · The Social Security Admin uses a formula that uses the CPI-W for three specific months and compares them year over year to create an adjustment percentage for Social Security benefits. · Use CPI-W from July August and September to next year’s July, August and September · Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). · Calculated on a monthly basis · Prices paid by urban wage earners and clerical workers for goods and services · But Social Security only uses one quarter to compare.

Seniors will be hit especially hard by a decrease in COLA because they have cost that have higher inflation rates than general economy – Medicare – Prescription costs – Forced to use deliver services to because of lockdown, which charge extra fees, – Extra measure to protect their safety – Transportation costs for private transportation rather than public · Can mean a very tough year for seniors in 2021 · Will have to see if the economy can get back up and running. · Unfortunately, have not seen any sort proposal that would help these people compensate for the potential decreased COLA.