Why Is There No Inflation Adjustment With My Social Security?

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’s question comes from Linda:

“I was told by my Social Security office that as a widow, I would at my full retirement age of 66 receive 100% of what my husband was receiving at his death, with no additional monies added for cost-of-living raises since his death (five years now).

Is that true? And if so why? This doesn’t seem right or fair to me, but they insisted it was correct. I would appreciate knowing if this is true, as it makes a big difference.”

Wrong information

Linda: What you were told is wrong. If you wait until your full retirement age, you will receive 100% of your husband’s inflation-adjusted benefit. Almost every aspect of Social Security is inflation-adjusted.

(One important exception is the income level that defines whether or not you have to pay taxes on your benefits — $25,000 for individuals and $32,000 for couples. These income levels have not been adjusted for 30 years.)

There are two different inflation adjustments that affect your benefits. The first adjusts the wages when calculating your benefits. Your earnings in earlier years are adjusted for wage inflation up to age 62, the earliest year that you can collect benefits.

After age 62, the benefits are adjusted each year using a cost-of-living adjustment (COLA) index for urban workers. The adjustment for 2021 is 1.3%.

One reason that the increases vary from year to year is that this COLA index includes price changes in oil and food prices, which can be very volatile. While these COLA adjustments are designed to protect beneficiaries, there has been extensive discussion as to whether this is an appropriate index to use for Social Security beneficiaries when medical expenses make up a much larger proportion of their budgets than urban workers’ budgets.

When calculating how much larger your Social Security check will be for a given year, it is important to recognize that the cost of Medicare Part B premiums is also adjusted for inflation.

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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.