Clever Economy

Social Security Checks Likely to Grow This Much in 2021





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, we have a special column: A look at how much your Social Security check is likely to grow next year.

A modest increase coming

Does the coronavirus pandemic mean we shouldn’t expect another inflation adjustment in Social Security benefits?

A quick answer to this question is that there will be an inflation adjustment to Social Security benefits beginning in January 2021, but it will be small.

Inflation adjustments were added to the Social Security program in the early 1970s to protect beneficiaries from increases in inflation.

When I worked at the Social Security Administration research office in the 1960s, Social Security benefits were raised each year, but the benefit increase had to be voted on by Congress. People in my office did not expect an automatic adjustment because members of Congress liked to say in their campaigns that they increased benefits each year.

The inflation adjustment is tied to the change in the Consumer Price Index for all urban consumers. This is the index that is normally cited by the press in stories about inflation. Social Security inflation adjustments reflect the change in the index for a year ending in September of that year.

This means that Social Security beneficiaries will receive an increase in benefits in January 2021 based on the change in the index through September 2020. We still do not have the calculation for September 2020, but we do have the calculation through August 2020. The change in the index for the year ending August 2020 was 1.3%, so the final calculation of the Social Security benefit change will be somewhere close to this figure if nothing dramatic happens this September.

The pandemic has had an impact on the size of next year’s Social Security checks. Prices fell in March, April and May, with the declines reflecting lower oil prices during these months. But prices recovered later in the year.

The impact of oil prices on the index highlights other questions about how well the CPI for all urban consumers reflects cost-of-living changes for people on Social Security. A CPI index measures the change in prices of a “market basket” of goods that people buy. The market basket of goods consumed by older Americans can differ from the market basket of urban consumers.

For example, older Americans consume more medical services than younger people. This year, the index might be further distorted as a cost-of-living measure because of the changing market basket of goods people have been buying during the pandemic. There is an experimental index, the CPI-E, which attempts to measure inflation of a market basket of goods purchased by the elderly. But it has never been used to calculate the Social Security inflation adjustment.

If you are paying for Medicare out of your benefit check, the inflation adjustment for this year will not be fully reflected in your benefit check. There will also be an adjustment in your Medicare premium that is subtracted from your benefit. This premium adjustment is based on the increased cost of the Medicare program.

In other words, you will probably see an increase in your benefit check in January, but it is unlikely to be very large.

Got a question you’d like answered?

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You also can find all past answers from this series on the “Social Security Q&A” webpage.

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.






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