On October 13, 2020, the Social Security Administration (SSA) officially announced that Social Security recipients will receive a 1.3 percent cost-of-living adjustment (COLA) for 2021. This adjustment will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Additionally, increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries will begin on December 31, 2020.1
I imagine the response of many social security recipients who upon learning about the 1.3% increase...."are you kidding me?" That's not surprising, especially if you live in areas where the cost of living is higher than the national average - some expenses a lot higher. The annual COLA increases are tied to any increases (not reductions) in the Consumer Price Index (CPI). In broad terms, the CPI measures the price of consumer goods and how they're trending to evaluate the economy.
Last week I wrote a blog about the issue of rising prices while receiving low income increases - whether it's from income tied to COLA's (pensions, social security) or investment returns from more conservative investments. Here is a chart from blog:
(Click to View Blog)
How You Will Be Notified
According to the Social Security Administration, Social Security and SSI beneficiaries are usually notified by mail starting in early December about their new benefit amount. However, if you’ve set up your SSA online account, you will also be able to view your COLA notice online through your “My Social Security” account.3
If this increase surprises or concerns you, it's always a good idea to seek guidance from your financial professional about changes to any of your sources of retirement income.