“The Social Security Administration announced Tuesday that the cost-of-living adjustment for retirees receiving Social Security benefits would increase by only 1.3 percent in 2021, the second year in which adjustments had been lower than the year before.”
“The 1.3 percent cost-of-living adjustment will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million [Supplemental Security Income] beneficiaries will begin on December 31, 2020,” SSA said in a news release.
As The Federal Times reports in its article, “Retiree cost of living adjustments sink for the second year in a row,” the Bureau of Labor Statistics calculates the cost-of-living adjustment — known as the COLA — each year based on the consumer price index for workers. It looks at the changing prices of common goods to which the average worker would be exposed.
However, the National Active and Retired Federal Employees Association has for many years had an issue with that type of calculation. That’s because it fails to take into account the differences in costs experienced by the elderly, who receive Social Security benefits, rather than the standard worker.
“This insufficient COLA fails to keep up with inflation experienced by seniors, further eroding their purchasing power. The cost of health care continues to rise faster than other goods. Seniors spend more on health care than any other segment of the population — just as the nation struggles to contain a virus that poses particular danger to older Americans. And federal retirees will almost certainly be further burdened by significantly higher Federal Employees Health Benefits program premiums, which have yet to be announced for 2021,” NARFE National President Ken Thomas said in a statement.
“This didn’t need to happen. For years, NARFE has urged Congress to address the inequity of COLAs that don’t keep up with rising health care costs by passing legislation requiring the BLS to calculate COLAs based on the consumer price index for the elderly instead of the consumer price index for workers.”
COLA adjustments have varied widely each year. For example, in 2015, there was no increase, and in 1980, the bump was 14.3%!
In the past 20 years, COLA increases have only twice been more than 4%. The good news is that military veterans will also see an increase to some of their benefits based on the COLA increase.
In September, Congress okayed plans to link a COLA in veterans benefits with the annual Social Security increase. Under current law, Congress must approve the veteran’s benefits increase each year, but Social Security beneficiaries get the boost automatically.
The benefits for vets include disability compensation, compensation for dependents, clothing allowances and dependency and indemnity compensation checks.
Those receiving Social Security benefits should be notified of their new benefit amount beginning in early December. Most recipients should also be able to see the notice in their online Social Security accounts.
Remember: “An ounce of prevention is worth a pound of cure.” When making your estate plans or when probating an estate or administering a trust, do not go it alone. Be sure to engage a Cincinnati estate planning attorney.
For more information about estate planning, probate or trust administration in Cincinnati (and throughout the rest of Southwest Ohio) and to review free resources regarding estate planning, probate or trust administration, visit my website. If you have questions regarding this article or a particular legal matter, feel free to contact me at 513-399-PLAN (7526).
Reference: The Federal Times (Oct. 13, 2020) “Retiree cost of living adjustments sink for the second year in a row”