Those receiving social security income, approximately 70 million Americans, will be seeing a slight increase in their monthly payments this year. With a 1.3% cost-of-living adjustment (cola), the Social Security Administration has shared that individual recipients will see their monthly benefits going up by about $240 a year.
What is a cost-of-living adjustment?
A cost-of-living adjustment ensures that inflation doesn’t eat up someone’s social security benefits. This adjustment began in 1975 and is adjusted annually.
Though this is not as high as last year’s increase of 1.6% or the 2019 increase of 2.8%, this increase will still help offset the modest upturn in inflation rates. This year’s increase should also help offset the increased gas prices that many states are experiencing.
In 2020, the average social security payment, for an individual, was $1,523 a month. This year, individual recipients should see that increase to about $1,543.
This cost-of-living increase has additional impacts on both Social Security tax and Supplemental Security Income.
What is Supplemental Security Income?
Supplemental Security Income (SSI) is a supplemental income program funded by taxes outside of the Social Security tax. SSI was created to help those who have little to no income like the disabled, blind, or elderly population. It’s meant to provide for basic needs such as food, clothing, or shelter.
For 2021, those who receive this supplemental income will see an increase with this cost-of-living change. Individuals will receive, on average, $794 while couples can expect $1,191.
The maximum amount of earnings subject to Social Security tax will increase to $142,800 compared to $137,700 last year.
Impact on Medicare Part B
In years previous, Social Security increases have been eaten up by higher Medicare Part B premiums. With standard monthly premiums only expected to rise by $8.70 this year that shouldn’t be the case. The new monthly premium is forecasted to call around $153.30.The new short-term spending bill will limit the 2021 increase to about 25% of what it should have been otherwise.
Most beneficiaries will be able to find out their specific cost-of-living adjustment online by logging on to my Social Security in December 2020. While you can still receive your social security increase notice by mail, you have the option to choose whether to receive your notice online instead of on paper.