The Social Security Administration announced on October 13th a 1.3% increase to Social Security and Supplemental Security Income (SSI) for 2021. The cost-of-living adjustment, or COLA, impacts roughly 70 million Americans; the modest increase translates to about $20 more per month for the average retiree and represents the smallest annual increase since 2017. The Social Security Administration also announced that the maximum amount of earnings subject to the Social Security tax will increase about 3.7% next year.

The annual COLA is tied to the increase in the Consumer Price Index (as determined by the Department of Labor) and is intended to keep Social Security benefits on par with inflation. Many have argued that the adjustment fails to account for rising housing and healthcare costs for older adults.

According to the Administration's press release, the 1.3% adjustment will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021, and increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2020.

Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. Most people who receive Social Security payments will be able to view their COLA notice online. More information is available here.