The 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021.
Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2020. (Note: some people receive both Social Security and SSI benefits).
The Social Security Act ties the annual cost-of-living to the Consumer Price Index increase as determined by the Department of Labor’s Bureau of Labor Statistics. Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $142,800 from $137,700.
From September 2019 to September 2020, the average wage increased by 3 percent. The average earnings change, combined with a 1.5 percent increase in the average workweek, resulted in a 4.5 percent increase in real average weekly earnings over this period. These rates are seasonally adjusted, so they will fluctuate some.
The average wage is an average per worker, not an average per job. A change in the latest average wage over the previous one is multiplied by the last Average Wage Index (AWI) to produce the next AWI. See this table here: average and median wage growth.
Social Security and SSI beneficiaries are usually notified by mail starting in early December about their new benefit amount. Most people who receive Social Security payments can view their cost-of-living notice online through their personal my Social Security account.
People may create or access their my Social Security account online at https://www.ssa.gov/myaccount.
For Social Security beneficiaries receiving Medicare, Social Security will not be able to compute their new benefit amount until after the Medicare premium amounts for 2021 are released. Final 2021 benefit amounts will be communicated to beneficiaries in December through the mailed cost-of-living notice and my Social Security’s Message Center.
The Supplemental Security Income (SSI) program pays benefits to disabled adults and children who have limited income and resources. SSI benefits also are payable to people 65 and older without disabilities who meet the financial limits. People who have worked long enough may also be able to receive Social Security disability or retirement benefits as well as SSI. Learn more about SSI.
Information about Medicare changes for 2021, when announced, will be available at www.medicare.gov.
The Social Security Act provides for how the cost-of-living is calculated. To read more, please visit https://www.ssa.gov/cola.