The Social Security Administration on Tuesday announced a 1.3% adjustment to the cost of living for 2021, which will increase checks on 64 million beneficiaries by just a few hundred dollars a year.
The adjustment is expected to increase the average beneficiary’s check by about $ 240 per year. The average monthly benefit will increase by $ 20 to $ 1
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This year’s increase is among the smallest so far and marks for the fifth time since 2010 that there will be an extremely low or even no adjustment, according to The Senior Citizens League.
“People who have been receiving benefits for 12 years or more have experienced an unprecedented series of extremely low cost-of-living adjustments (COLA),” said Mary Johnson, a Social Security and Medicare policy analyst at The Senior Citizens League. . .
Benefits increased by 1.6% in 2020, 2.8% in 2019, 2% in 2018, 0.3% in 2017 and 0% in 2016.
The increase will take effect in January for social security recipients and on December 31 for supplementary security recipients.
The cost of living adjustments, which began in 1975, are being applied to counteract the effects of inflation. However, some senior advocacy groups have expressed concerns that spending has risen faster than inflation in recent years.
The Adult League claims that benefits have lost 30% of their purchasing power since 2000.
Richard Fiesta, executive director of the Alliance for Retired Americans, called COLA 2021 “disappointing” in a statement Tuesday, saying the increase was “almost not enough” to cope with rising spending on drugs and other expenses.
“The coronavirus pandemic is also hitting a lot of older people,” Fiesta said. “At least 16% of older people who have lost their jobs are due to the coronavirus pandemic, which means that social security is a major part of their income.”
From a broader perspective, there are heightened concerns about the future solvency of the program – given the economic effects of the coronavirus pandemic.
Johnson told FOX Business that the drop in payroll tax revenues could lead to a drop in funding for the program, which is already facing solvency problems.
“Because so many people lost their jobs and some businesses closed completely, there was a big drop in revenue coming into the program,” Johnson said.
Unemployment is not subject to payroll taxes.
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In addition to these concerns, President Trump has introduced a payroll tax deferral that begins in September and lasts until the end of the year. He hopes these payments will be simplified – an action that requires congressional approval – which could lead to further damage to trust funds.
However, as is currently the case, employees are responsible for paying taxes that are deferred from their salaries the following year.
The trustees’ annual report did not take into account the effects of the coronavirus when it was estimated that the programme’s reserves would be depleted by 2035. At that time, the levies were expected to be sufficient to cover 79% of the benefits provided.
An analysis by researchers from Penn Wharton’s budget model showed that social security was at risk of running out of funds up to four years earlier than expected, depending on the shape of the US economic recovery.
Trump has pledged not to harm the popular program, and his Democratic opponent, former Vice President Joe Biden, plans to expose more than $ 400,000 in income to 12.4 percent of the social security tax – evenly distributed among employees and employers. There is currently a salary limit of $ 137,700.
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