The Forecast for the 2021 Social Security COLA

Published on: November 25, 2020

Thousands of people depend upon the Social Security Administration (SSA) for financial security and any implemented changes directly affect them. To keep up with inflation, the SSA makes changes every year to the COLA. These Social Security updates were recently announced and while the Social Security COLA adjustments for 2021 are modest, they do include some increases to the cost of living adjustment. 

Here’s a closer look at some of the adjustments coming to the Social Security COLA in 2021 and how they affect your disability benefits. 

What is a COLA?

Every year, the Social Security Administration takes data collected by the U.S. Bureau of Labor Statistics to adjust Social Security benefit amounts, in what they call the Cost of Living Adjustment, or COLA. These adjustments usually reflect changing dollar values in the U.S. economy due to inflation and the average cost of living for Americans.

Social Security COLA’s began after legislation enacted in 1973 and have reflected financial changes in the past year, and so differ every year with how much is increased.

Who Is Eligible for COLA?

Recipients of Social Security benefits all receive the Social Security COLA increase. Of course, this doesn't mean every beneficiary is receiving the same amount of benefits. The COLA percentage is applied to the type and amount of benefits the person is receiving.

How Is COLA Calculated?

The SSA uses a specific formula for determining any changes to the near year’s COLA. According to the Social Security Act, COLA’s are determined by any increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). These are calculated on a monthly basis by the Bureau of Labor Statistics.

According to the SSA, a COLA effective for December of the current year is equal to the percentage increase (if any) in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective. Any increases must be rounded to the nearest tenth of one percent. There is no COLA for the year if there is no increase or if the rounded increase is zero. 

What are the Latest COLA Updates for 2021? 

Here is a closer look at the 2021 Social Security COLA and what updates will affect you and your disability benefits. 

There will be a Social Security COLA Increase

The good news is recipients will be receiving more money! The SSA announced a 1.3% COLA for the upcoming year. This news may come as bittersweet to many, since the 1.3% increase is the second-smallest positive increase in COLA history. However, it still means more money in recipient's pockets. 

The 1.3% increase will translate to about a $16 increase for disabled workers and less for disabled widow(ers). These updates are outlined below:

Disabled Worker                               

Before 1.3% COLA: $1,261

After 1.3% COLA: $1,277             

Increase: $16

Disabled Widow(er)

Before 1.3% COLA: $760

After 1.3% COLA: $770

Increase: $10

Family Benefits: Disabled Worker, Spouse, & Children

Before 1.3% COLA: $2,197

After 1.3% COLA: $2,226

Increase: $29

Family Benefits: Surviving Children Only

Before 1.3% COLA: $1,172

After 1.3% COLA: $1,188

Increase: $16

Family Benefits: Aged Widow(er) Alone

Before 1.3% COLA: $1,434

After 1.3% COLA: $1,453

Increase: $19

Family Benefits: Widowed Mother & Two Children

Before 1.3% COLA: $2,964

After 1.3% COLA: $3,002

Increase: $38

These estimates from the SSA are based on actual benefit data from August 2020. 

The recipients of SSI benefits will also see a 1.3% increase in their monthly benefits. For the average beneficiary, payments will increase from $783 to $794, a $11 increase. The average couple gets $16 more a month, to $1,191 from $1,175. 

The 2021 COLA will feature a payment increase, albeit modest.

The Retirement Age Will Be Increasing

The 2021 COLA also includes an increase to the “normal retirement age” by the SSA. The full retirement age is the threshold when a person can receive 100% of their monthly payout and is determined by birth year. In 2021, the retirement age will increase by two months to 66 years and 10 months for people born in 1959. 

While claiming retirement benefits before reaching your full retirement age will cause a permanent reduction to your monthly payout, waiting till reaching the full retirement age threshold can provide benefits. The SSA’s full retirement age will peak at age 67 in 2022 for anyone born in 1960 or later.

Disability Income Thresholds Are Expanding

The income thresholds for the millions of recipients of disability benefits will be increased in 2021. Currently, non-blind disabled recipients can receive up to $1,260 a month in 2020 without fear of having their disability benefits stopped. In 2021, this threshold is increasing $50 a month to $1,310 - which means beneficiaries are able to earn up to $600 extra per year without risk to their disability benefits.  

For blind beneficiaries, who receive $2,110 a month the increase is $80 a month to a threshold limit of $2,190. 

Substantial Gainful Activity (SGA) Increases in 2021:


2020: $1,260/mo. 

2021: $1,310/mo. 

Overall Increase: $50


2020: $2,110/mo.

2021: $2,190/mo. 

Overall Increase: $80

Trial Work Period (TWP): 

2020: $910/mo. 

2021: $ 940/mo. 

Overall Increase: $30

This allows recipients who are still capable of Substantial Gainful Activity to make a little more money on the side on top of their disability benefits. 

If you’re thinking about applying for disability benefits, whether now or in the new year, don’t hesitate to reach out to the experienced disability advocates at DEF first! The process is fraught with complicated requirements and paperwork, but working with an advocate experienced with the application process and SSA can make all the difference in your case. Reach out today!


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