As the calendar turns the page from August to September, we find ourselves about six weeks away from finding out what the 2021 Social Security Cost of Living Adjustment will be.
And while that official announcement is expected to be made by the Social Security Administration on or about October 13, July inflation figures released by the Bureau of Labor Statistics has led to some revised predictions on where it might fall.
July being the first month of a third quarter where CPI-W inflation data is plugged in to calculate the 2021 COLA by comparing it to average prices in the third quarter of 2019, experts are beginning to zero in on the adjustment.
The Kiplinger Letter projected a 2021 COLA of 1.2% on Aug. 24 after earlier in the year predicting the increase would be below 1%, while Jim Blankenship, a financial planner and author of “A Social Security Owner’s Manual,” predicts a COLA of 0.44%.
Mary Johnson, a Social Security policy analyst with the Senior Citizens League with an extraordinary track record of accurately predicting the next year’s COLA, recently told AARP she believes there will be a 1.1% COLA while David Certner, AARP’s director of legislative policy for government affairs, is quoted in the same article as saying, “We have a shot at somewhere between 0.5% and even as high as 1%.”
The Motley Fool’s Dan Caplinger noted in mid-August that if the CPI-W in August and September were to match July’s 0.6% rise, it would lift this year’s three-month average by just enough to produce a 1.6% 2021 COLA, matching the 2020 figure. But if August and September stay flat, the rise would be 1%.
And then there’s one longshot out there that could lead to a much more substantial increase: Johnson and The Senior Citizens League is asking Congress to consider providing an emergency minimum COLA benefit boost of no less than 2.5% in an effort to “provide real benefit adequacy and avoid extreme Medicare Part B Premium spikes this fall.”
For comparison purposes, the average COLA over the past decade has been a 1.52% increase, with the largest being 2019’s 2.8% increase. For 2020, the increase was 1.6%. Since 2010, there have been three years (2010, 2011, 2016) where there was no COLA at all, and six more when it was 2% or less.
A 2.5% COLA increase for 2021 would mean an additional $37.85 per month for the average retiree, based on the current average Social Security retirement benefit of $1,514.13 a month. A 1.6% increase would add about $24 per month, a 1% increase an additional $15.14 per month while a 0.5% increase would be just $7.57 a month.
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Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
