On October 13, 2020, the Social Security Administration (SSA) officially announced that Social Security recipients will receive a 1.3% 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
Is this a COLA lite? This bump may feel modest compared to the 1.6% increase beneficiaries saw in 2020 or the 2.8 percent boost in 2019. However, it’s important to remember that the Social Security Act ties the annual COLA to the increase in the Consumer Price Index (CPI). In broad terms, the CPI measures the price of consumer goods and how they’re trending in to evaluate the economy. In short, lower inflation numbers usually equal a modest COLA.2
How will I be notified? According to the SSA, 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
What are my next steps? If this information 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.
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