2020 Social Security saw a 1.6% cost-of-living increase for the nearly 69 million Social Security and Supplemental Security Income (SSI) beneficiaries. For an average retiree who receives monthly social security benefits of $1,460, that adds up to an additional $23.40 a month.
See our COLA increase watch for more on the COLA and 2021 social security increase. Will the Coronavirus have an impact?
#BREAKING! Nearly 69 million Americans will get a 1.6% increase in monthly #SocialSecurity and #SSI benefits in 2020. Check #SocialSecurityMatters later this morning for more information: https://t.co/BDNvNs2Opi #COLA #2020COLA
— Social Security (@SocialSecurity) October 10, 2019
“The 1.6 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 63 million Social Security beneficiaries in January 2020. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2019. ” ~ SSA statement
The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $137,700 from $132,900, a 3.61% increase.
2020 Social Security and SSI Effective & Payment Dates:
- Social Security benefits are effective beginning with December 2019 benefits, which are payable in January 2020.
- Federal SSI payment levels will begin on December 30, 2019.
To calculate the 2020 COLA (Cost-of-Living Adjustments) increase, if any, the average of the indices of July, August, and September 2019 are be compared with the 2018 3rd quarter average. The end result is the percentage by which Social Security benefits are adjusted. This is referred to as the Cost of Living Adjustment (COLA).
How Social Security is Calculated
Social Security benefits are based lifetime earnings and are adjusted or “indexed” to actual earnings to account for changes in average wages since the year the earnings were received. Then, Social Security calculates the average indexed monthly earnings during the 35 years in which the most was earned. They apply a formula to these earnings and arrive at your basic benefit, or “primary insurance amount.” This is how much would be received at your full retirement age — 65 or older, depending on the date of birth.
How Are Social Security Increases Calculated?
To ensure the value of money at retirement keeps up with the rate of inflation, the SSA ties its adjustment for Social Security benefits to the wage earners’ Consumer Price Index (CPI-W). The increase is known as a Cost-of-Living Adjustment (COLA) and it calculates the change in the CPI-W for urban wage earners and clerical workers from the third quarter average of the previous year to the third quarter average for the current year
|Third quarter total||739.056||750.599|
|Average (rounded to the nearest 0.001)||246.352||250.200|
|Inflation According to the CPI-W||2.8%||1.6%|
Third quarter 2018 was used for the three month average comparison as the law dictates that the SSA use the same three months of “the last year in which COLA became effective”.
|Estimated Average Monthly Social Security Benefits Payable in January 2020|
|Before 1.6% COLA||After 1.6% COLA|
|All Retired Workers||$1,479||$1,503|
|Aged Couple, Both Receiving Benefits||$2,491||$2,531|
|Widowed Mother and Two Children||$2,889||$2,935|
|Aged Widow(er) Alone||$1,398||$1,421|
|Disabled Worker, Spouse and One or
|All Disabled Workers||$1,238||$1,258|
|History of COLA (cost-of-adjustments) since 1975|
|Money & Finance||Cost of Living Adjustment|
|VA Disability Rates||States That Don’t Tax Social Security|