Each year the Social Security Administration announces its annual cost-of-living adjustment (COLA) for Social Security benefits in October, but the Senior Citizens League, which is a nonpartisan advocacy group for seniors, has accurately predicted the COLA in past years prior to October. For 2021 the group is estimating a 1.3 percent increase in benefits in 2021.
The 1.3 percent increase would be even lower than the 1.6 percent increase in 2020. All Social Security beneficiaries, whether they receive retirement benefits, disability benefits or survivor’s benefits, will be eligible for the increase in 2021. Below is a description of how the annual COLA is determined. As you can see Social Security has no say in the matter, as COLA is predetermined.
There is an index, compiled and managed by the Bureau of Labor Statistics, called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. This index, or rather changes to the index, indicates the fluctuations in selected wages over time. Each October, SSA looks at the CPI-W level for the third quarter of that year (averaging July, August and September), and compares it to the same level for the previous year’s third quarter. The percentage of increase, if any, is then used as COLA for Social Security benefits. This is an automatic process, no action is required by Congress to enact the increases over time. Also, being automatic, without passage of a law Congress can’t bypass an increase when the numbers warrant.
This minuscule COLA is another hit to people who are trying to survive a pandemic. Most people are aware that Social Security retirement and disability benefits are extremely modest and most beneficiaries rely on a decent annual COLA increase to get them by, but that is not likely in 2021.
