The Social Security Administration has announced that payments to retired and disabled beneficiaries will increase by 1.3% in 2021. This inflation adjustment is intended to offset the higher costs-of-living encountered by beneficiaries. The increase is effective for payments received in January 2021 for retirement benefits.
The 1.3% increase also applies to recipients of Supplemental Security Income (SSI).
Social Security is a major source of income and financial security for most elderly Americans. In 2020 approximately 65 million individuals were receiving over one trillion dollars in Social Security benefits.
The Social Security Administration reports that:
- Nearly nine out of ten Americans age 65 and older receive Social Security benefits.
- Overall, Social Security benefits represent about 33% of the income of the elderly. But the percentage is much higher for many individuals and couples.
- Among elderly Social Security beneficiaries, 50% of married couples and 70% of unmarried persons receive 50% or more of their income from Social Security.
- Among elderly Social Security beneficiaries, 21% of married couples and about 45% of unmarried persons rely on Social Security for 90% or more of their income.
These statistics show that Social Security is a critical support for older adults. But the system is facing great stress. In 1940 the average 65-year-old had a life expectancy of 14 years. Today it is over 20. By 2035 the number of Americans age 65 and older is expected to increase from 50 million today to over 78 million.
And Social Security funding is under attack. Social Security is financed through a dedicated payroll tax paid by employers and employees. In 2019, 89 percent of total Old-Age and Survivors Insurance and Disability Insurance income funding came from these payroll taxes. But payroll tax receipts are being reduced by Covid-19 induced unemployment. Separately, President Donald Trump has proposed the reduction or even elimination of payroll tax. Elimination of the payroll tax without creation of a new funding source would cause the Social Security retirement trust fund to run out in 2023, while the disability trust fund would be depleted even sooner, according to a recent estimate by the Social Security Administration.
New monthly benefit amounts for Social Security beneficiaries who are receiving Medicare will not be available until after the Medicare premium amounts for 2021 are announced. Beneficiaries should receive a mail notice no later than December which will provide their benefit amount for the 2021 calendar year.