2021 Social Security COLA will be disappointing – but there will be at least one


Social security is critical to the financial survival of millions of retirees. Most Social Security recipients rely on the program for most or all of their income. Even for people with other financial resources, monthly checks from Social Security go a long way towards providing financial security.


Close to a book: The 2021 Social Security COLA will be disappointed - but there will be at least one


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2021 Social Security COLA will be disappointing – but there will be at least one


Every year, senior people eagerly await word on how much they are going to see in early 2021 to see their benefits. This is because social security payments are adjusted for inflation every year. Yet with deflationary pressures related to COVID-19 in early 2020, some feared that the 2021 Social Security Cost Adjustment (COLA) could be extremely low or zero. Now it seems unlikely, but no one is likely to be happy with the size that will probably come in January.



Close to a book: two social security cards on top of a $ 100 bill.


© Getty Images
Two social security cards on top of a $ 100 bill.

A 0% cola is off the table

Each year’s cola depends on a particular measure of inflation. CPI-W represents the prices of an item that people need, and when the total cost of that basket increases, it pushes the index higher.

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However, 2020 brought deflation to the mix. When the COVID-19 pandemic hit, especially submerged energy prices, as gasoline and other fuels for transportation inevitably disappeared. This sent CPI measures downward, and as recently as May, CPI-W readings were lower at the same time in 2019. If prices were to stay that low, it meant no COLA for Social Security for 2021. .

Prices began to rise more recently, as retrying helped push energy prices backwards, in particular. A more typical price trajectory is taken to withdraw a couple in the high-inflation months in June and July, but now, seniors are guaranteed to get something Additional to their investigation beginning in January.

Two down, one to go

The Bureau of Labor Statistics gave Social Security recipients its latest update on the measurement of inflation on Friday. August inflation figures include a 0.4% increase for CPI-W, bringing the level to 253.597.

When you combine that number with the July CPI-W reading of 252.636, you get a two-month average of 253.117. The calculation is still missing from a month, as you will have to compare the average of the three months of this year with the average period of the previous year from July to September to get an official cola number.

Still, you can get a feel for where things are. The 2020 two-month average is 1.2% higher than the 250.200 reading over the three-month period of 2019. If September’s CPI-W number is flat compared to August, the COLA will actually be 1.2%. If September matches August’s 0.4% growth, Cola will increase slightly to 1.4%.

How big would that mean?

COLAs apply to social security checks, so the larger your benefit, the larger your growth. In August the average retiring received $ 1,517 per month from the program, so a 1.2% to 1.4% COLA would operate between $ 18 and $ 21 in monthly checks in $ 2021. The typical surviving husband just gets paid $ 1,417 monthly and can see. $ 17 to $ 20 extra next year.

Even the maximum profit will not see a huge increase. The 70-year theoretical limit of someone is $ 3,790 per month. A COLA is likely to come in between $ 45 and $ 53 per month.

However, it is good that Social Security will have to reduce their monthly benefits by at least 2021. As difficult as it is to live on a fixed income, COLAs are necessary to ensure the purchasing power of social security. Time.

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