Social Security Announces Minimal Cost of Living Adjustment for 2021 by Jeffrey M. Mutnik, CPA/PFS
Posted on November 03, 2020
by
Jeffrey Mutnik
Recipients of Social Security benefits, including Supplemental Security Income (SSI), will receive a modest 1.3 percent cost-of-living adjustment in 2021, down from 1.4 percent in 2020, according to a recent announcement from the Social Security Administration. This meager bump during the financial challenges brought about by the COVID-19 pandemic will bring just a few extra dollars each month to the more than 70 million senior citizens, widows, disabled and special needs persons who rely on those benefits each year.
For 2021, individual retirees will receive an estimated average monthly Social Security benefit of $1,543, a monthly increase of $20 from 2020. Disabled workers’ average monthly benefit will increase by $16 for a total of $1,277 per month. These amounts do not account for the rising Medicare Part B premium payments that are deducted automatically from beneficiaries’ Social Security payments.
The Social Security Act ties the annual COLA to the Consumer Price Index, as determined by the Department of Labor’s Bureau of Labor Statistics. However, advocacy groups argue that
such a standard in not an appropriate measurement for the rising costs of expenses usually incurred by senior citizens and individuals with special needs. While efforts are underway to lobby Congress for an emergency COLA increase in 2021, all individuals should recognize that Social Security alone cannot finance a comfortable retirement nor the perpetual care of family members with disabilities or special needs. Instead, individuals at all income levels should plan ahead under the direction of professional accountants and financial advisors to help secure the financial future they and their loved ones deserve.
Retirement planning may involve the use of tax-advantaged 401(k) plans, individual retirement accounts (IRA), and/or insurance policies that provide financial benefits to surviving family members. Trusts, including special-needs trusts, are also critical for maintaining a special need child’s eligibility for Social Security and Medicaid benefits, protecting assets from creditors and preserving those assets to support the ongoing care and quality of life of one’s beneficiaries.
About the Author: Jeffrey M. Mutnik, CPA/PFS, is a director of Taxation and Financial Services with Berkowitz Pollack Brant Advisors + CPAs, where he provides tax- and estate-planning counsel to high-net-worth families, closely held businesses and professional services firms. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at info@bpbcpa.com.
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