The cost of living adjustment (COLA) will increase Social Security benefits by 1.6 percent in 2020, an average of about $24 per month for individuals, the Social Security Administration announced Wednesday.
The increase for 2020 is notably less than the 2.8 percent bump received this year, but higher than the average over the past decade (1.4 percent).
The COLA will boost the average Social Security retirement benefit for a single person by $288 per year. The average retirement check is expected to be $1,479 in December 2019 before the COLA raises the benefit to $1,503 a month later, according to the administration.
“Social Security is the largest source of retirement income for most retirees, so today’s announcement of a 1.6 percent COLA increase, while modest, will help Social Security beneficiaries and their families as they try to keep up with rising prices,” AARP Chief Executive Officer Jo Ann Jenkins says. “Social Security’s annual COLA amount typically does not keep pace with all the increases in living expenses that most seniors face, including the costs of housing, food, transportation and, especially, health care and prescription drugs. AARP’s recent Rx Price Watch report found that retail drug prices increased by twice the rate of inflation during 2017, and have exceeded the inflation rate for at least 12 consecutive years.”
The monthly premium for Medicare Part B recipients is expected to be announced soon. This premium could affect individual Social Security benefits because it is deducted directly from benefit payments. Part B Medicare covers physician and diagnostic services, outpatient hospital services, certain home health services and durable medical equipment.
Social Security is paid for by a payroll tax on workers’ wages. Next year, the maximum amount of earnings subject to the Social Security tax will increase from $132,900 to $137,700.
The Social Security program does face long-term funding challenges. According to the 2019 annual report from the Social Security and Medicare Board of Trustees, the trust fund reserves that help pay for Social Security benefits will be fully depleted in 2035, unless Congress passes new legislation. Once those funds are exhausted, the program would only be able to pay out 80 percent of what each beneficiary should be getting.
“AARP will continue our advocacy for bipartisan solutions to help ensure the long-term solvency of the Social Security program, as well as adequate benefits for recipients,” Jenkins says. “We will also continue to fight for lower health care and prescription drug costs, which are eating up a growing share of Social Security benefits.”
For information about Social Security benefits and claiming strategies, those approaching retirement age may visit AARP’s Social Security Resource Center.
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