The annual Social Security cost-of-living adjustment may only be 0.8%, according to one early estimate based on first quarter data. That's less than the 1.6% bump retirees saw to their monthly benefit checks this year. Here's what's driving the forecast down.
The number is an early estimate based on first quarter data from the Bureau of Labor Statistics. It could be subject to change by the time the change for next year is announced in October.The Social Security Administration calculates the COLA based on the"What's going on in the first quarter is, primarily, gasoline prices plunged," said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
A 0.8% increase would be the lowest adjustment since 2017, when it was 0.3%. However, it would also be better than 2016, 2011 and 2010, when the COLA was zero. Right now, we're seeing the immediate effects of the coronavirus on the economy. That may be a domino effect that could hit seniors particularly hard, Johnson said.
"Older Americans are going to be hit by longer term effects," Johnson said. "Their retirement portfolios have gone down.Currently, there are 65 million Americans who receive Social Security benefits, 45 million of whom are retired workers. Their average monthly benefit is $1,503.A lower adjustment for 2021 would trigger a rule called the hold harmless provision, which protects certain people from having their Medicare Part B premiums go up more than their COLA adjustment.
Meanwhile, older Americans will face likely face more financial challenges amid Covid-19, including hospitalizations that can result in higher out-of-pocket costs if they use Medicare Advantage plans.
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