COLAs are not guaranteed, and in recent history there have been several years in which older people have not obtained any social security increases. And earlier this year, it looked like the outlook for a COLA for 2021 was pretty bleak. This is because COLAs are based on data from the third quarter of the Consumer Price Index for urban and office workers (CPI-W), which measures changes in the cost of common goods and services.
When gasoline prices fell sharply earlier this year, it looked like the result would be an absent COLA for seniors again in 2021. But thanks to the CPI-W movement in recent months, seniors might now have a chance to rise, after all.
How much more money will seniors be entitled to next year?
Social Security COLAs are based on third quarter data from the CPI-W, and so far we have no figures for September. But the Senior Citizens League estimates that seniors are likely to receive a 1.3% raise next year based on existing data. For the average Social Security senior, that would be just under an additional $ 20 per month.
Sure, a 1.3% COLA is way better than no COLA at all, but to be clear, it’s not a generous bump. Over the past decade, when inflation has been abnormally low, COLAs have averaged 1.4%. Over the previous decade, they were on average 3%.
In addition, any Social Security COLA could be nullified by an increase in Medicare Part B premiums. Due to the program’s harmless disposition, Medicare increases cannot result in a drop in monthly Social Security benefits from year to year. another among the elderly who pay their premiums directly from their benefits. But what an increase in the Medicare premium can do is eat a whole COLA, or most of it.
The Senior Citizens League says Medicare Part B premiums could increase by $ 17.40 per month in 2021 due to the coronavirus pandemic. As such, while seniors may, in theory, qualify for a 1.3% increase next year, whether they get that money into their hands is another story.
The Social Security Administration makes its annual COLA announcement in October, once the September CPI-W data becomes available. At this point, millions of seniors are no doubt waiting on the edge of their seats to hear what the 2021 COLA will bring. Let’s just hope they’re not too disappointed with the ultimate number.