Social Security Cost of Living Adjustment (COLA) for 2021: 1.3% –

The Social Security Administration announced that benefits will increase by 1.3% in 2021. That is the smallest cost-of-living adjustment (COLA) since 2017 — but consider that, earlier this year, thanks to pandemic-induced price gyrations — retirees were looking at the prospect of no 2021 increase at all.

The estimated average monthly Social Security benefit payable in January 2019 will increase from $1,523 in 2020 to $1,543 — that’s one Andrew Jackson. The average monthly benefit for a couple who are both receiving benefits will rise $33, from $2,563 to $2,596. And the maximum Social Security benefit for a worker retiring at full retirement age will increase from $3,011 per month to $3,148, an additional $137.

Also, more of workers’ income will be subject to the Social Security tax in 2021. The Social Security tax will apply to the first $142,800 of earnings, up $5,100 from $137,700 in 2020.

COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (similar to, but not exactly the same as, the urban dwellers’ consumer price index used in inflation reporting). Any adjustment is based on the percentage increase for average prices for the third quarters of the preceding and current years. If prices don’t increase and even fall, the COLA is zero. That happened in 2010 and 2011, as the economy struggled to recover from the Great Recession, and again in 2016, when plummeting oil prices swept away any chance of a COLA for that year.


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