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Automatic Cost of Living Adjustments | 2021

Automatic Cost of Living Adjustments | 2021

The SSA adjusts the SSDI amounts for social security payments each year by adjusting them with inflation through a complicated formula for cost of living.

Cost-of-Living Adjustment

Enacted in 1973, the federal legislation allows the SSA to adjust the amount of SSDI paychecks to keep up pace with the changing dynamics of the economic system.

The SSA utilizes the Social Security Act using a complex formula to calculate the annual COLA. According to the formula, COLAs are mostly based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). According to the US Bureau of Labor Statistics, this CPI-W is calculated consecutively each month.

For example, a COLA effective for December of the present year would be equal to the percentage increase (if any) in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which that COLA became effective. So, if there is an increase for the given time, the figure would be rounded off to the nearest tenth of one percent. Subsequently, if there is no increase, or if the rounded increase is zero, there would be no Cost of Living Adjustment for that year.

Cost of Living Adjustment for 2021

Social security pays approximately 70 million Americans on social security disability benefits. In 2021, this SSDI payment has a 1.3 percent COLA on their monthly benefits.

COLA computation

This 1.3 percent for COLA in 2021 is taken by the last computed COLA done in 2019. This is because the rates of inflation have remained almost the same since early COVID times in late 2019 till today.

As a result, the maximum amount of earnings receivable subject to the SSDI taxes (FICA taxes maximum taxable amount) is $142,800. **Note that many of these earning limits depend on your age at the time of retirement. For example, you must be at least 62 for the entire month to receive benefits.

For every age group, the SSDI amount varies. For instance, the earning limits for workers who are above retirement age will reduce to $18,960. That is, the SSA deducts $1 from benefits for each $2 earned over $18,960. Similarly, the threshold amount for earnings limit for people reaching their 'full' retirement age in 2021 has now increased to $50, 520. (The SSA deducts $1 from benefits for each $3 earned over $50520 until the month the worker turns ''full'' retirement age).

Before You Decide

There is no threshold limit on earnings for workers who reach 'full' retirement age or older for the entire year. However, there are both pros and cons of taking your benefits before full retirement age. The good news is that early benefits could mean getting benefits for an extended period of time. On the other hand, the downside is your benefit will be reduced. Remember, the situation is different for each claimant, depending on many medical and non-medical factors.

You can check for your COLA notices and SSDI amounts in your social security account online. If you decide to take your benefits later after full retirement age (65), then you will be eligible for delayed retirement benefits.

For further enquiries, you can consult our disability attorneys at Law Office of Irene Ruzin.

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Thursday, 11 August 2022