Folks receiving Social Security benefits will see a modest cost-of-living increase for 2021. The Social Security Administration announced in October a 1.3% boost for 2021, slightly less than the 1.6% increase that went into effect for 2020.
The higher payments will begin in January 2021 for over 64 million people across the nation receiving Social Security and Dec. 31, 2020 for more than 8 million SSI beneficiaries. For the 64 million Americans who get Social Security, this will lift the average monthly benefit, which is $1,503 in 2020, to $1,522 in 2021.
Each year, the Social Security Administration assesses whether there should be an adjustment to benefits so that their purchasing power keeps up with inflation. The agency uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, CPI-W, from the Bureau of Labor Statistics. Increases are thus linked to how much inflation the economy is exhibiting.
Historically, increases are not to be taken for granted. In fact, the cost-of-living adjustment was zero in some recent years like 2010, 2011, and 2016. Since 2009, the average annual cost-of-living adjustment has only been 1.4%, a testament to the anemic inflationary pressures as measured by the CPI-W since the Financial Crisis.