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Cost of Living Adjustment 2021

Cost of Living Increase in 2021

The Social Security Administration (SSA) will increase the cost of living adjustment (COLA) by 1.3% in 2021. This COLA increase relates to a slight rise in the Department of Labor’s Consumer Price Index (CPI-W). Over the last 12 months ending August 2020, the CPI-W has increased by 1.3%, with food prices rising 4.1%, energy prices down 9%, and airline fares fell by 23.2%. United Airlines planned to cut more than 16,000 jobs and will now cut 13,000 jobs. SSA will mail COLA notices in December to retirement, survivors, disability beneficiaries, and SSI recipients.

Approximately 70 million Americans will see a 1.3 percent increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2021.

blog.ssa.gov
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Happy senior receives COLA notice in the mail

Higher At-Home Food Costs

Cost of Living Adjustment 2021 - Senior at empty meat shelves
Where’s the beef? Increased demand for food at home results in supply chain disruption and empty grocery store shelves.

During the coronavirus pandemic in April 2020, States shut-down and restaurants closed. As a result, the high demand for groceries disrupted the food supply chain. Food distribution was not able to quickly shift from restaurants to grocery stores. Consequently, the cost of food at home rose by 4.6 percent!

Food shortages led to grocery stores with empty shelves. For example, if you could find eggs, they would be the most expensive organic eggs and cost about three times as much as generic eggs. Many meatpacking plant employees became infected with COVID-19. As a result, many meatpacking plants closed or operated at limited capacity creating meat shortages. I remember going to a grocery store meat section and seeing nothing but empty shelves.

COLA comparison 2017 – 2021

Cost of Living Adjustment 2021 chart

How does a 1.3% increase in the 2021 Cost of Living Adjustment compare to the previous four years? In 2016, COLA was zero. Since then, COLA has increased to .3% in 2017, 2% in 2018, to a high of 2.8% in 2019. Then COLA began decreasing to 1.6% in 2020 and 1.3% in 2021.

Social Security Taxes and Benefits in 2021

High-income earners may pay more social security taxes in 2021. The maximum taxable earnings will increase $5,100 from $137,700 in 2020 to $142,800 in 2021. However, the 2021 tax rate for social security and medicare will remain the same as in 2020.

People who reach full retirement age in 2021 will earn an extra $137/month. Your maximum social security benefit will increase from $3,011/month in 2020 to $3,148/month in 2021. View all 2021 Social Security changes.

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