Reports are conflicting as to whether there will be a cost-of-living adjustment (COLA) for 2021 benefits for Social Security, military retirees, disabled veterans and others.
Based on the current economic landscape – which has been in flux since the COVID-19 pandemic – estimates show that if there is any increase it will be lower than average: probably under 1%. The 2020 COLA increase was 1.6%, raising the average $1,500 retirement benefit by $24. That was a drop from the 2019 COLA increase of 2.8%.
COLA increases are based on the Consumer Price Index, the federal government’s official measurement of inflation. It measures third quarter (July, August and September) changes in the prices of 80,000 goods and services from a year ago. COLA is triggered when prices go up.
COLA helps those on a fixed income maintain a viable standard of living in the face of inflation.
Reasons for a COLA increase: COVID-19 has created food and product disruption which could result in higher prices in the third quarter; coronavirus fears and ongoing economic impact; continued tariffs from the U.S. on China.
Reasons for a lower-than-expected COLA increase: The coronavirus may mean no Social Security increase for 2021; oil prices are at an 18-year low; prices of goods and services continued to plummet this spring; travel, entertainment, dining and auto sales continue to be depressed; U.S. economic growth will most likely slow due to uncertainties.
The U.S. House of Representatives passed legislation May 28 asking for an increase for veterans benefits in 2021, so long as Social Security and COLA increase as well. It asks the VA to increase rates of VA disability, additional compensation for dependents, the clothing allowance for certain disabled veterans, and Dependency and Indemnity Compensation (DIC) for surviving spouses and children.
Due to the current health crisis, Senate votes and meetings have been delayed.
The 2021 COLA won’t officially be set until October 2020.