Social Security checks to get ‘extremely low’ COLA bump in 2021
The average yearly benefit will increase by about $250
The Social Security Administration on Tuesday announced a 1.3% cost of living adjustment for 2021, which will increase checks for the program’s 64 million beneficiaries by just a few hundred dollars per year.
The adjustment is expected to boost the average beneficiary’s check by about $240 per year. The average monthly benefit will rise $20 – to $1,543 from $1,523.
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This year’s increase is among the smallest ever, and it marks the fifth time since 2010 that there will be an extremely low, or even no, adjustment, according to The Senior Citizens League.
“People who have been receiving benefits for 12 years or longer have experienced an unprecedented series of extremely low cost-of-living adjustments (COLAs),” Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, said in a statement.
Benefits increased by 1.6 % in 2020, 2.8% in 2019, 2% in 2018, 0.3 percent in 2017 and 0% in 2016.
The increase will take effect in January for Social Security recipients and Dec. 31 for Supplemental Security Income recipients.
Cost of living adjustments, which began in 1975, are implemented in order to counteract the effects of inflation. However, some senior advocacy groups have expressed concerns that costs have risen faster than inflation throughout recent years.
The Senior Citizens League claims benefits have lost 30% of their purchasing power since the year 2000.
Richard Fiesta, executive director of the Alliance for Retired Americans, called the 2021 COLA “disappointing” in a statement on Tuesday, saying the increase it not “nearly enough” to keep up with rising drug costs and other expenses.
“The coronavirus pandemic is also hitting many seniors hard,” Fiesta said. “At least 16% of seniors who work have lost their job due to the coronavirus pandemic meaning Social security is a larger portion of their income.”
From a broader perspective, there is heightened concern about the future solvency of the program – given the economic effects of the coronavirus pandemic.
Johnson told FOX Business that a decline in payroll tax revenues could lead to a drop in funding for the program, which is already facing solvency issues.
“With so many out of work, and some businesses closing altogether, there’s been a big drop in revenues going into the program,” Johnson said.
Unemployment pay is not subject to payroll taxes.
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Beyond those concerns, President Trump has implemented a payroll tax deferral, which begins in September and runs through the end of the year. He has hopes those payments will be forgiven – an action that requires congressional approval – which could spell further damage for the trust funds.
However, as it stands now, employees are responsible for paying back the taxes that are deferred from their paychecks next year.
The annual trustees’ report did not take the effects of coronavirus into account when it estimated that the program’s reserves would be depleted by 2035. At that time, levies were expected to be sufficient to cover 79% of scheduled benefits.
An analysis conducted by researchers at the Penn Wharton Budget Model showed that Social Security is at risk of running out of funds as many as four years earlier than anticipated depending on the shape of the U.S. economic recovery.
Trump has pledged not to harm the popular program and his Democratic opponent, former Vice President Joe Biden, plans to expose incomes above $400,000 to the 12.4% Social Security tax – split evenly between employees and employers. Currently, there is a wage cap of $137,700.
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