Social Security cost-of-living adjustment could be 1.3% in 2021
- There's about a month to go before the Social Security Administration officially announces its cost-of-living adjustment for 2021.
- Based on this year's data, one group estimates beneficiaries could only see a 1.3% increase to their monthly checks next year.
- That could be tough news for retirees who are already grappling with rising costs amid the Covid-19 pandemic.
There's still about one month to go before the Social Security Administration announces its cost-of-living adjustment to benefits for 2021.
And seniors who rely on those monthly checks in retirement might be in for disappointment, based on recent data.
New estimates indicate the Social Security COLA for 2021 could be about 1.3%, which is among the lower increases the program has made. That's according to The Senior Citizens League, a nonpartisan advocacy group for older Americans that has a history of accurately predicting the annual change.
The Senior Citizens League's estimate is based on Consumer Price Index data through August. The actual COLA change will be calculated using data through September.
More from Personal Finance:
How upcoming legislation could affect your Social Security
Blind spots to avoid when claiming Social Security benefits
Dreaming of retiring abroad? What you need to know
A 1.3% increase is smaller than the 1.6% bump to benefits that retirees and other beneficiaries saw in 2020. In 2019, they received a 2.8% boost to their monthly checks.
A 1.3% adjustment would also mark the fifth time since 2010 that there has been a small or no increase, said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League. In 2010, 2011 and 2016, the COLA was zero. In 2017, it was 0.3%.
The average cost-of-living adjustment since 2010 has been 1.4%. Between 1999 and 2009, annual increases averaged 3%.
The change is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.
Critics, including The Senior Citizens League, say that measurement fails to take into account the price changes that affect older consumers, particularly housing and medical expenses.
"It makes no sense whatsoever," Johnson said of the reduced COLA estimate, which comes at a time of higher costs for many seniors.
A different index — called the Consumer Price Index for the Elderly, or CPI-E — has been touted for calculating the COLA instead of the CPI-W. But it is still an experimental measurement. Legislation would be needed to make an official change.
In the meantime, the 1.3% estimate could shift by next month. Johnson said she is watching gasoline prices, which are more heavily weighted in the CPI-W.
"There is a chance that the price of gasoline won't drop any further, so it could possibly go up to 1.4%," Johnson said.
This is a breaking news story. Please check back for updates.