The Social Security Administration announced a 1.3% cost of living adjustment (COLA) for 2021Tuesday, increasing the amount the program’s 64 million recipients will receive.
However, the adjustment will not amount to much. The average monthly benefit people in the program receive will increase by just $20 a month from $1,523 to $1,543. The COLA adjustment is the smallest in the history of the Social Security program.
“People who have been receiving benefits for 12 years or longer have experienced an unprecedented series of extremely low cost-of-living adjustments (COLAs),” Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, said in a statement.
The COLA adjustment is 1.6% this year, 2.8% last year, and 2% in 2018. In 2016 and 2017 the COLA adjustment was a combined 0.3%
COLA adjustments, which began in 1975, were created to counteract the costs of inflation. However, senior advocacy groups say costs have risen faster than inflation. According to the Senior Citizens League, seniors have lost 30% of their purchasing power since 2000.
Richard Fiesta, the executive director of the Alliance for Retired Americans, called the COLA adjustment “disappointing” in a statement Tuesday, saying the increase is not “nearly enough” to help with the rising costs of food, medication, and rent.
Additionally, the coronavirus pandemic has also made it difficult for seniors to continue living independently. Many seniors who were active before the pandemic are now stuck sitting alone at home to avoid getting sick.
“The coronavirus pandemic is also hitting many seniors hard,” Fiesta said. “At least 16% of seniors who work have lost their job due to the coronavirus pandemic meaning Social Security is a larger portion of their income.”
President Trump has also drawn the anger of seniors with his payroll tax deferral, which began last month. Under the plan, employees earning less than $104,000 will keep the 6.2% payroll tax that represents their share of Social Security taxes. However, employees would still be responsible for the taxes under the plan, meaning those who stop taking payroll taxes now will be withholding twice as much next year.
While most private businesses have opted out of the deferral, the federal government will opt-in, meaning if you have a federal job, your checks will be larger than before, but you’re also on the hook to pay that back next year.
Trump said if he is re-elected, he will eliminate payroll taxes completely, however, White House officials say that plan is not currently under consideration. More importantly, Trump has no control over payroll taxes, because it would require an act of Congress to wipe out the liability altogether.
Payroll taxes fund the Social Security program and without it, the surplus is expected to run out within the next 15 years. Additionally, because so many Americans are out of work, the Social Security fund is taking less money than since the 2008 recession because payroll taxes aren’t taken from unemployment.