Social Security COLA 2021 Forecast and Facts

Social Security COLA 2021 Forecast and Facts

Fulcrum Partners Executive Benefits News, Human Resources

If there is a Social Security COLA 2021, it is likely to be modest, at best.

At some point, between now and the election, the Social Security Administration will publish its annual announcement regarding any Cost of Living Adjustment (COLA) for next year. Fox Business quoted The Senior Citizens League as saying the Social Security cost of living adjustment for next year is likely to be 1.3 percent.

COLA is determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers, which is the measure of changes in consumer prices of specific “market basket” items for a select group of workers.

The Senior Citizens League pointed out, in a press release issued on September 15, that the “market basket” the government uses to measure inflation and calculate the annual Social Security adjustment doesn’t accurately reflect senior spending. While the index, which looks at the spending patterns of workers younger than 62, includes items such as electronics and gasoline, it should instead be giving more importance to housing and healthcare, which more accurately reflect the cost of living for Social Security recipients.

Two Sides to the Impact of The Coronavirus Pandemic on Social Security

An analysis published in May by Penn Wharton University of Pennsylvania Budget Model (PWBM) looked at the impact of the coronavirus pandemic on Social Security’s finances.

The pandemic, according to the study, reduced revenue into Social Security by eliminating jobs and therefore reducing payroll tax revenues. It also reduced earned interest by lowering the interest rates received by the Trust Fund. Conversely, the pandemic also increased deaths, reducing the number of recipients drawing Social Security, reduced the earnings of workers, which decreases the overall future draw; and reduced next year’s draw due to the projected lower COLA.

Other Key Facts about Social Security COLA 2021 and Past Years*Key Facts about Social Security COLA 2021

  • Currently 65 million Americans collect Social Security benefits
  • Retired workers and their dependents account for 73.2% of total benefits paid
  • In 2020, over a trillion dollars was paid in Social Security benefits
  • Social Security represents approximately 33% of the income of most elderly Americans
  • There are currently 2.8 workers for each Social Security beneficiary; by 2035, there will be 2.3 covered workers for each beneficiary
Year Percent of Benefit Increase
2021 1.2 to 1.3% projected
2020 1.6%
2019 2.8%
2018 2.%
2017 0.3%
2016 Zero

 

#SocialSecurity #COLA #COVID19

* SSA.gov Fact Sheet

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

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