2021 Cost of Living Raises Could be Among the Smallest in History

October 12, 2020

If you are disabled and receive Social Security or Supplemental Security Income benefits, you will get more money next year, but not a lot. The increase will likely be less than this year’s increase. The 2020 Cost-of-Living Adjustment (COLA) resulted in a 1.6 % increase, but you won’t get anything like that in 2021.

Social Security laws stipulate that the amount of money paid to Americans who receive Social Security benefits (old age and disability) must be adjusted annually for inflation. The Social Security Administration uses one of the measures of the Consumer Price Index (CPI) to gauge the inflation level during the third quarter of the year (July, August and September). Although the September inflation figures are not yet available, the inflation rate has been low this year, so the 2021 COLA will likely be a slim 1.3% increase tying the lowest positive increase since 1975. (The annual COLA has been worse. It was 0% three times: 2010, 2011, and 2016.)

The change will take effect beginning December 31 for the more than 10 million Social Security disability beneficiaries nationwide and in January 2021 for more than 63 million Americans receiving Social Security old age benefits. The average increase for disability beneficiaries will be about $19.70 per month. For some higher income beneficiaries the COLA increase will be mostly wiped out by increases in Medicare Part B premiums—which cover doctors’ exams, outpatient care, and some preventive services. Premiums could rise by a hefty $17.40 a month in 2021 because of large pandemic-related Medicare costs. Most Medicare beneficiaries are not in high income brackets and are protected by a legal loophole which has a “hold harmless” clause that requires Part B premiums be adjusted to prevent reduction to the net Social Security benefit of eligible people.