One source noted that the 1.3 percent cost-of-living adjustment (COLA) increase is the lowest increase since 2017. However, earlier in 2020, some sources were predicting that there would be no 2021 COLA increase.
How much will the COLA increase impact you?
According to Social Security, the average worker should receive about $20 more per month. The estimated average Social Security Benefit for all Retired Workers was $1,523 and increases to $1,543 after the 1.3% COLA increase.
More information about the purpose of COLA is provided on the Social Security Administration (SSA) website:
The purpose of the [cost-of-living adjustment] COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation. [COLA] is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA.
The entire October 13, 2020 SSA press release on the 2021 COLA increase is following:
"The 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2020. (Note: some people receive both Social Security and SSI benefits). The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $142,800 from $137,700.
Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. Most people who receive Social Security payments will be able to view their COLA notice online through their personal my Social Security account. People may create or access their my Social Security account online at www.socialsecurity.gov/myaccount.
Information about Medicare changes for 2021, when announced, will be available at www.medicare.gov. For Social Security beneficiaries receiving Medicare, Social Security will not be able to compute their new benefit amount until after the Medicare premium amounts for 2021 are announced. Final 2021 benefit amounts will be communicated to beneficiaries in December through the mailed COLA notice and my Social Security's Message Center.
The Social Security Act provides for how the COLA is calculated. To read more, please visit www.socialsecurity.gov/cola."
NOTE TO CORRESPONDENTS: Here is a fact sheet showing the effect of the various automatic adjustments.
Thursday, October 13, 2020
Mark Hinkle, Press Officer
For Immediate Release
press.office@ssa.gov
Sources
"Bad News: Your 2021 Social Security COLA Will Probably Be Zero"(https://www.fool.com/retirement/2020/03/16/bad-news-your-2021-social-security-cola-will-be-0.aspx)
https://www.ssa.gov/news/press/releases/2020/#10-2020-1
https://www.ssa.gov/news/press/factsheets/colafacts2021.pdf
https://www.ssa.gov/cola/
"Social Security Cost of Living Adjustment (COLA) for 2021: 1.3%"
(https://www.kiplinger.com/retirement/social-security/601538/social-security-cost-of-living-adjustment-cola-for-2021-13)