Social Security officially announced that the cost-of-living adjustment would be 1.3 percent next year. This means that Social Security beneficiaries will receive a 1.3 percent increase in their benefit amount beginning in 2021. Below is a portion of the press release from Social Secuirty announcing the increase for next year.
The 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2020. (Note: some people receive both Social Security and SSI benefits). The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $142,800 from $137,700.
Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. Most people who receive Social Security payments will be able to view their COLA notice online through their personal my Social Security account.
Unfortunately this is not the boost in benefits that Americans had hoped for. As also was indicated by Social Security, the amount of income subject to Social Security taxes increased to $142,800. This means that high earners do not have to pay taxes on income over this amount. There has been discussions to increase or even eliminate this income limit threshold to improve Social Security’s financial outlook. It is time for the formula in deciding benefit increases to be changed. Right now people are struggling financially and a 1.3 percent increase in benefits next year will not go very far.
