Social Security Checks Likely to Grow This Much in 2021

Photo by shurkin_son / Shutterstock.com

Welcome to our “Social Security Q&A” series. You ask a question about Social Security, and a guest expert answers it.

You can learn how to ask a question of your own below. And if you would like a personalized report detailing your optimal Social Security claiming strategy, click here. Check it out: It could result in receiving thousands of dollars more in benefits over your lifetime!

Today, we have a special column: A look at how much your Social Security check is likely to grow next year.

A modest increase coming

Does the coronavirus pandemic mean we shouldn’t expect another inflation adjustment in Social Security benefits?

A quick answer to this question is that there will be an inflation adjustment to Social Security benefits beginning in January 2021, but it will be small.

Inflation adjustments were added to the Social Security program in the early 1970s to protect beneficiaries from increases in inflation.

When I worked at the Social Security Administration research office in the 1960s, Social Security benefits were raised each year, but the benefit increase had to be voted on by Congress. People in my office did not expect an automatic adjustment because members of Congress liked to say in their campaigns that they increased benefits each year.

The inflation adjustment is tied to the change in the Consumer Price Index for all urban consumers. This is the index that is normally cited by the press in stories about inflation. Social Security inflation adjustments reflect the change in the index for a year ending in September of that year.

This means that Social Security beneficiaries will receive an increase in benefits in January 2021 based on the change in the index through September 2020. We still do not have the calculation for September 2020, but we do have the calculation through August 2020. The change in the index for the year ending August 2020 was 1.3%, so the final calculation of the Social Security benefit change will be somewhere close to this figure if nothing dramatic happens this September.

The pandemic has had an impact on the size of next year’s Social Security checks. Prices fell in March, April and May, with the declines reflecting lower oil prices during these months. But prices recovered later in the year.

The impact of oil prices on the index highlights other questions about how well the CPI for all urban consumers reflects cost-of-living changes for people on Social Security. A CPI index measures the change in prices of a “market basket” of goods that people buy. The market basket of goods consumed by older Americans can differ from the market basket of urban consumers.

For example, older Americans consume more medical services than younger people. This year, the index might be further distorted as a cost-of-living measure because of the changing market basket of goods people have been buying during the pandemic. There is an experimental index, the CPI-E, which attempts to measure inflation of a market basket of goods purchased by the elderly. But it has never been used to calculate the Social Security inflation adjustment.

If you are paying for Medicare out of your benefit check, the inflation adjustment for this year will not be fully reflected in your benefit check. There will also be an adjustment in your Medicare premium that is subtracted from your benefit. This premium adjustment is based on the increased cost of the Medicare program.

In other words, you will probably see an increase in your benefit check in January, but it is unlikely to be very large.

Got a question you’d like answered?

You can submit a question for the “Social Security Q&A” series for free. Just hit “reply” to the Money Talks News newsletter and email your question. (If you don’t already receive the newsletter, you can sign up for free, too: Click here, and the sign-up box will pop up.)

You also can find all past answers from this series on the “Social Security Q&A” webpage.

About me

I hold a doctorate in economics from the University of Pennsylvania and taught economics at the University of Delaware for many years. Presently, I am teaching at Gallaudet University.

In 2009, I co-founded SocialSecurityChoices.com, an internet company that provides advice on Social Security claiming decisions. You can learn more about that by clicking here.

Disclaimer: We strive to provide accurate information with regard to the subject matter covered. It is offered with the understanding that we are not offering legal, accounting, investment or other professional advice or services, and that the SSA alone makes all final determinations on your eligibility for benefits and the benefit amounts. Our advice on claiming strategies does not comprise a comprehensive financial plan. You should consult with your financial adviser regarding your individual situation.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
33 Home Upgrades That Cost Less Than $100

A little money goes a long way with these imaginative projects. You can do most of them yourself.

10 Ways Retailers Trick You Into Spending More

Think you’re a savvy shopper? Find out how retailers persuade you to dig more deeply into your wallet.

Beware These 5 Common Work-From-Home Scams

You can spot scammers and con artists with a little know-how.

9 Houseplants That Remove Toxins From Your Indoor Air

These plants may also do everything from reduce the amount of dust in your home to improve your productivity.

20 Generic Brands That Amazon Created

Amazon’s growing collection of private brands offers everything from toilet paper and coffee to motor oil and clothing.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

Why Cloth Masks May Increase Your Coronavirus Risk

A new study finds that wearing a cloth mask can backfire if you don’t clean it properly.

11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

This Is the Cheapest Place to Buy a Used Car

Looking for a good deal on a set of wheels? This should be your first stop.

19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

7 Surprising Features That Boost Your Home Value

You can add value to your home without hiring a contractor to do expensive renovations.

5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.