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October 13, 2020 at 11:36 AM
Social Security and Supplemental Security Income recipients will see a 1.3% cost-of-living adjustment in 2021, the Social Security Administration announced today. The increase will begin on Dec. 31, 2020.
The Social Security Act ties the annual COLA to the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W, as determined by the Labor Department’s Bureau of Labor Statistics. There was no increase in 2010, 2011 or 2016.
Based on the increase, the maximum amount of 2021 earnings subject to the Social Security tax (taxable maximum) will increase to $142,800 from $137,700.
However, the tax rates will remain the same for 2021 as in 2020 for employees (7.65%, with another 7.65% paid by employers) and self-employed workers (15.30%).
The estimated average monthly Social Security benefit will be $1,543 for all retired workers; $2,596 for an aged couple, both receiving benefits; $1,453 for retired widow(er)s; and $1,277 for all disabled workers.
“People who have been receiving benefits for 12 years or longer have experienced an unprecedented series of extremely low cost-of-living adjustments,” said Mary Johnson, a Social Security policy analyst for The Senior Citizens League, in a statement.
“What’s more, those inflation adjustments do not account for rapidly rising Medicare Part B premiums that are increasing several times faster than the COLA,” explained Johnson. “The situation is causing those with the lower Social Security benefits to see little growth in their net Social Security income after deduction of the Part B premium.”
According to the league, a provision of a recently enacted government spending bill restricts Part B premium increases in 2021. The bill caps the Part B premium increase for next year at the 2020 amount plus 25% of the difference between the 2020 amount and a preliminary amount for 2021.
