This is the average Social Security benefit in 2021

For tens of millions of Americans, no program is more important to their financial well-being than Social Security.

According to the Social Security Administration (SSA), 62% of current retirees rely on the program to calculate at least half of their monthly income. In addition to, More than 15 million retired workers They are pushed out of poverty every month as a result of their guaranteed bonus, based on analysis from the Center for Budget and Policy Priorities.

Social Security Beneficiaries Receive An “Extra”

Given the importance of the program, it should come as no surprise that the most anticipated announcement each year is the Social Security Administration’s release in October of next year’s Cost of Living Adjustment (COLA). Think of the COLA as the “raise” that recipients receive to correct their payments to account for inflation.

Since 1975, the Consumer Price Index for Urban and Clerical Workers (CPI-W) has been an inflationary loop of Social Security. CPI-W has a Eight major spending categories And tens and tens of subcategories, each with their own weights. Changes in the prices of goods and services covered by the CPI-W can be reduced to a single digit, which is used to determine whether inflation (rising prices) or deflation (falling prices) is occurring.

For Social Security, only CPI-W readings from the third quarter (July through September) Factor in COLA Calculation. While the other nine months of data can be helpful in setting trends, it has no bearing on whether or not recipients will receive larger monthly payments in the next year. If the average CPI-W reading from the third quarter of the current year is higher than the average CPI-W reading from the third quarter of the previous year, recipients will receive an increase in payments proportional to the annual percentage change, rounded to the nearest ten percent .

As reported on October 13, beneficiaries of Social Security You could expect to get 1.3% COLA When the calendar changes to 2021.

Image source: Getty Images.

This will be the average monthly Social Security payment in 2021

The question is, what does 1.3% COLA really mean to beneficiaries? Let’s take a closer look.

As of September, 64.75 million people had monthly Social Security payments, of whom nearly 46.1 million were retired workers. The median benefit of a retired worker last month was $ 1,519.07. Based on recently released estimates from SSA, monthly payments to retired workers are projected to reach $ 1,523 by December 2020. And given the COLA jump of 1.3%, it will increase by $ 20 to $ 1,543 in January 2021. In other words, average Retired Worker, you’ll get an additional $ 240 for the full year of 2021.

For disabled workers, the increase will be less robust, in nominal terms. All recipients are set to receive 1.3% of the Employment Assistance Act (COLA), but the program of 8.25 million disabled workers was bringing home only $ 1,259.12 a month as of September. By December, the Social Security Administration (SSA) estimates that this monthly amount will grow a little to $ 1,261. Thus, 1.3% of COLA should lead to an estimated $ 16 monthly increase by January 2021, pushing the average disability worker benefit up to $ 1,277.

SSA provides a number of other estimated average return scenarios beyond 1.3% COLA that may be relevant to you:

• An elderly couple, where both people receive benefits, should see an increase of $ 33 per month to $ 2,596 in 2021.
• Widows or elderly widows can expect an increase of $ 21 in their monthly payments to $ 1,453.
• A disabled worker with a wife and children or more can expect their payments to rise $ 29 a month to $ 2,224 in January.
• It is estimated that a widowed mother of two will see her payments increase $ 39 per month to $ 3,001.

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Image source: Getty Images.

It’s a good news / bad news scenario for the beneficiaries

He considered that the Corona pandemic led to an increase in the prices of various goods and services Low screaming between March and MayIt’s actually great news that nearly 65 million Social Security beneficiaries receive COLA at all. The rebound in food price inflation and the year-on-year health rise in shelter and medical care services has ensured that benefits will rise in 2021. This is good news.

But COLA correlations fell 1.3% for the second smallest positive increase since CPI-W was linked to the program in 1975. This poses a problem because inflation in shelter and healthcare costs – two of the most important expenditures for the elderly – was easily overtaking by 1.3% on a subsequent yearly basis. 12 months In other words, 1.3% of COLA simply wouldn’t lower it than retired workers, and it is very likely that Social Security income will lose purchasing power again.

Earlier this year, the non-partisan advocacy group The Senior Citizens League released an analysis showing that the purchasing power of Social Security income It has decreased by a whopping 30% since 2000. This means that what was once $ 100 in Social Security income he was able to buy in 2000 can now buy only $ 70 worth of similar goods and services. Disadvantages inherent in CPI-W Ensure that older people lose purchasing power on their Social Security income for years more than not.

Benefits will rise across the board in 2021, but there is simply not much to get excited about Social security The recipients.