Social Security COLA Is 1.6% for 2020

Mary Johnson, the league’s Social Security policy analyst, notes that “people who have been retired for 10 years or longer have absorbed the full financial blow of low COLA growth.”

Her analysis found that the average Social Security beneficiary receiving $1,075 per month in 2009 collected $15,258 less from 2010 to 2019 than they would have if the COLA has averaged 3%, the typical adjustment of the previous decade. By the end of the 10 years, that recipient’s  benefit would be $223 less per month.

The league supports legislation that would require a minimum COLA of 3%, even in years when inflation falls below that amount. “Strengthening the COLA,” Johnson says, “would help slow the drain of retirement savings and help keep older Americans out of poverty.”

The impact of the 1.6% Social Security COLA on retirees will depend in part on the increase in Medicare Part B premium, which is expected to be announced any day now. This year, when the Social Security COLA increased 2.8% from 2018, the Medicare Part B premium, which pays for outpatient medical services and supplies such as doctor visits and medical equipment,  rose only $1.50, leaving beneficiaries with most of the COLA in hand.

Next year, when the COLA increase will much smaller, at about $23 a month for the average Social Security recipient, the Medicare Part B premium increase is expected to increase $8.80 per month, wiping out nearly 40% of the Social Security COLA.

Given these expectations, William Meyer, CEO Social Security Solutions, which provides advice about claiming strategies for impending retirees, recommends that “every retiree should create a detailed budget to understand their spending in 2020. It’s clear that the Social Security COLA a will not keep up with inflation for a senior.”

The Social Security COLA is based on the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) between the third quarter of 2018 and third quarter of 2019. When the government reported the September CPI Thursday morning — which was unchanged from August — it had all the data needed to report the 2020 COLA.