‘Modest’ boost of Social Security benefits coming

‘Modest’ boost of Social Security benefits coming

Social Security benefits will 1.3 percent in 2021, an increase called “modest” but important for the approximately 70 million Americans who depend on the payments.

The cost-of-living adjustment (COLA) for Social Security and Supplemental Security Income (SSI) will begin in January 2021 and on Dec. 31, 2020 for Supplementary Security Income (SSI). The increase, which amounts to about $20 a month for individuals is tied to the Consumer Price Index as determined by the U.S. Department of Labor’s Bureau of Labor Statistics.

Along with the COLA that was announced Oct. 13, the Social Security Administration also revealed the maximum amount of earnings subject to the Social Security tax will increase in 2021 to $142,800, about $5,000 more than the previous $137,700.

Social Security is funded by a payroll tax of 12.4 percent on eligible wages of workers. The tax covers current benefits, with any excess going into the Social Security trust fund.

AARP’s chief executive officer, Jo Ann Jenkins, said the next year’s COLA, “while modest, is needed to help Social Security beneficiaries and their families try to keep up with rising costs. The benefits are more crucial than ever as millions of Americans continue to face the one-two punch of the coronavirus’s health and economic consequences.”

The increase for next year is smaller than the 1.6 percent boost in 2020. COLAs have averaged 1.6 percent annually for the past decade, though there was no increase in 2016.

According to AARP, Social Security is the largest source of retirement income for most beneficiaries and provides about 90 percent of the income of a quarter of seniors nationally.

Beneficiaries will be formally notified of their benefit increases by mail starting in December, Social Security officials said. Most beneficiaries can also view their notice online through their personal Social Security account at www.socialsecurity.gov/myaccount.

Medicare Part B premiums, which cover doctor visits and outpatient services, are deducted directly from Social Security benefit s. A recent change in federal law reduced the premium for Part B recipients. Otherwise, next year’s Social Security COLA would have been swallowed by the premium increases that were expected as a result of higher emergency Medicare spending due to COVID-19.

Thanks to the changes, “more seniors will at least see a small monthly COLA,” Jenkins said.