2021 Social Security COLA
The 2021 Social Security COLA is 1.3%.
Effective 2021-01-01Source: Cost-of-Living Increase and Other Determinations for 2021 (SSA)Verified 2026-09-01
Compared with 2020
| Item | 2020 | 2021 | Change |
|---|---|---|---|
| Cost-of-living increase | 1.6% | 1.3% | -0.3% (-18.7%) |
Who it applies to
The increase applies to people receiving Social Security retirement, survivors or disability benefits under title II of the Social Security Act, and to people receiving Supplemental Security Income under title XVI. Both rise by 1.3 percent. A title II benefit reflects the increase from the December 2020 benefit, which is payable in January 2021; an SSI payment reflects it from the payment made for January 2021. It is a single rate rather than a per-person calculation, so every benefit it applies to rises by the same 1.3 percent and what differs between people is the amount the rate is applied to. The same notice settles other program amounts for 2021 as well, among them the contribution and benefit base, the retirement earnings test exempt amounts and the substantial gainful activity amounts; this page states the cost-of-living increase only, and each of those is a separate figure with its own sentence in the notice.
What changed this year, and why
The Social Security Administration determined a cost-of-living increase of 1.3 percent for 2021. Its notice states the increase as 1.3 percent for benefits under title II of the Social Security Act and for payments under title XVI, so retirement, survivors and disability benefits and Supplemental Security Income payments all rise by the same 1.3 percent. Under title II the increase reaches individuals eligible for December 2020 benefits, which are payable in January 2021. SSI payments increase by 1.3 percent effective for payments made for January 2021. The increase for 2020 was 1.6 percent; each year's figure is determined on its own and stated in its own notice.
Common questions
- What is the 2021 Social Security COLA?
- It is 1.3 percent. SSA's notice for 2021 states that the cost-of-living increase is 1.3 percent for benefits under title II of the Social Security Act and for payments under title XVI.
- When does the 2021 COLA take effect?
- Under title II it is effective for individuals eligible for December 2020 benefits, which are payable in January 2021. That is why an increase settled in the autumn of 2020 is the increase people see in their 2021 payments.
- Does the 2021 COLA apply to Supplemental Security Income?
- Yes. Federal SSI payments also increase by 1.3 percent, effective for payments made for January 2021. The notice states the same increase for title XVI payments as for title II benefits.
- Who settles the COLA, and where is it published?
- The Social Security Administration does, and it publishes the determination as a notice in the Federal Register titled "Cost-of-Living Increase and Other Determinations for 2021". That notice is the document this page cites, and it is where 1.3 percent is stated in a sentence.
- How is the cost-of-living increase worked out?
- From the Consumer Price Index for Urban Wage Earners and Clerical Workers, which the Bureau of Labor Statistics produces. SSA compares that index for the calendar quarter ending in September with the same quarter of the most recent year in which an increase was determined, and rounds the result. For 2021 that computation gave 1.3 percent.
- Does every beneficiary get the same increase?
- The rate is the same for everyone it applies to: the notice states a single increase of 1.3 percent for benefits under title II and payments under title XVI. What differs between people is the benefit the rate is applied to, not the rate itself.
- What else does the same notice decide?
- The notice that carries the 1.3 percent increase also settles other amounts for 2021, including the contribution and benefit base, the retirement earnings test exempt amounts, the substantial gainful activity amounts and the SSI student earned income exclusion. Each of those is a separate figure with its own sentence in the notice, and this page publishes the cost-of-living increase only.
- How does the 2021 COLA compare with the year before?
- The increase for 2021 is 1.3 percent. The increase for 2020 was 1.6 percent. Each year's figure is settled on its own and stated in its own notice, so an increase in a given year does not carry into the next.
How the increase is computed, and when there is none
Social Security determines the annual cost-of-living adjustment (COLA) by comparing the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third calendar quarter of the prior year to the third calendar quarter of the current year. The third quarter covers July, August, and September. The law specifies that if the CPI-W does not rise - meaning the percentage change is zero or negative - no COLA is issued for the coming year. Because the comparison is based solely on these three months, movements in the CPI during the rest of the year have no effect on whether benefits increase. Only after the September index value is finalized can the SSA announce the adjustment for the next cycle. The COLA, when triggered, is applied across the board to all beneficiaries whose eligibility began before the year the increase takes effect.
The law states that a cost-of-living increase for benefits is determined based on the percentage increase, if any, in the CPI from the last computation quarter to the third quarter of the current year.
Cost-of-Living Increase and Other Determinations for 2021 (SSA)
Only three months of the CPI decide it
The increase is not measured over a year of prices. The Act defines a cost-of-living computation quarter as three months, and the index for that quarter is one number: the arithmetic mean of the index for the 3 months in it. That mean is rounded to the nearest 0.001 before any comparison is made, and the comparison is then between two such means a year apart. Two things follow for anyone reading the 1.3% on this page against inflation reported elsewhere. Prices in the other nine months of the year never enter the calculation directly; they matter only insofar as they are still showing in the third quarter when it comes round. And a sharp move late in the year does not raise the increase announced for 2021. It falls inside the following year's quarter, so it is carried into the next announcement instead.
Section 215(i)(1) of the Act states that the CPI for a cost-of- living computation quarter is the arithmetic mean of this index for the 3 months in that quarter. In accordance with 20 CFR 404.275, we round the arithmetic mean, if necessary, to the nearest 0.001.
Cost-of-Living Increase and Other Determinations for 2021 (SSA)
It starts with December benefits, paid in January
Social Security benefits are paid one month behind: the benefit for a given month is received in the following month. The COLA therefore does not appear immediately at the start of the calendar year. For 2021, the 1.3 percent increase applies to benefits for December 2020, which are payable in January 2021. That means the first payment reflecting the higher amount is the one recipients receive in January. Anyone who was already eligible for Social Security benefits before 2021 receives the full increase. People who first became eligible after 2020 do not receive the 1.3 percent adjustment for that year.
In accordance with section 215(i) of the Act, for workers and family members for whom eligibility for benefits (that is, the worker's attainment of age 62, or disability or death before age 62) occurred before 2021, benefits will increase by 1.3 percent beginning with benefits for December 2020, which are payable in January 2021.
Cost-of-Living Increase and Other Determinations for 2021 (SSA)
Working before full retirement age withholds part of the benefit
Under the Retirement Earnings Test, SSA withholds benefits from people who are below full retirement age and earn above the annual exempt amount. The withholding rate differs depending on how close the beneficiary is to full retirement age (NRA). In the year a person reaches NRA, the rate is more lenient: SSA withholds $1 in benefits for every $3 of earnings over the annual exempt amount, but only for months before the month of NRA attainment. For all other beneficiaries under NRA, the rate is steeper: $1 is withheld for every $2 of earnings over the lower annual exempt amount. Once a beneficiary reaches NRA, the earnings test no longer applies and there is no withholding regardless of how much they earn.
For beneficiaries who attain NRA in the year, we withhold $1 in benefits for every $3 of earnings over the annual exempt amount for months before NRA. For all other beneficiaries under NRA, we withhold $1 in benefits for every $2 of earnings over the annual exempt amount.
Cost-of-Living Increase and Other Determinations for 2021 (SSA)
The year you reach full retirement age has its own limit
Social Security applies a Retirement Earnings Test to beneficiaries who are below full retirement age (NRA). In most years before reaching NRA, a lower annual exempt amount applies. However, in the calendar year in which a person reaches NRA, a higher exempt amount applies — but only to earnings in the months before the month in which NRA is attained. Once the beneficiary reaches the month of NRA, the earnings test no longer applies for the rest of that year and all subsequent years. The higher exempt amount is therefore available only for that transitional period. The annual exempt amounts are set by statute and adjusted each year based on changes in the national average wage index. Because the higher amount covers only months before NRA attainment, a beneficiary who reaches NRA in January effectively gets no benefit from it that year, while someone who reaches NRA in December gets nearly a full year of the higher threshold.
A higher exempt amount applies in the year in which a person attains NRA, but only for earnings in months before such attainment.
Cost-of-Living Increase and Other Determinations for 2021 (SSA)
What earnings count as substantial gainful activity
To qualify for Social Security disability benefits, a person must be unable to engage in substantial gainful activity (SGA). SSA uses monthly earnings thresholds to determine whether work activity qualifies as SGA. A person who is earning more than the applicable monthly amount is ordinarily considered to be engaging in SGA and is therefore not considered disabled for benefit purposes. The SGA amount differs depending on whether the disability is blindness. Statutorily blind individuals under title II have a separate, higher SGA threshold set by statute. For non-blind disabled individuals, the SGA amount is set by regulation. Both amounts are adjusted annually based on changes in the national average wage index.
A person who is earning more than a certain monthly amount is ordinarily considered to be engaging in SGA.
Cost-of-Living Increase and Other Determinations for 2021 (SSA)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Cost-of-Living Increase and Other Determinations for 2021 (SSA)
- Cost-of-living increase
The cost-of-living increase is 1.3 percent for monthly benefits under title II and for monthly payments under title XVI of the Act.