Social Security-related benefits will rise 1.6% starting in January because of an automatic cost-of-living adjustment, or COLA, the Social Security Administration announced Thursday. This will put money in the pockets of 63 million Americans receiving Social Security.
Benefactors of this rule will see their monthly hand out increase nominally. According to the SSA, the maximum monthly payout for an individual who retires at full retirement age (66) in 2019 is $2,861. With the 2020 increase, that amount would increase by $45.77.
“People are going to be dipping into savings,” Mary Johnson, a policy consultant for the Senior Citizens League told USA Today. “And when they don’t have the savings, they might have to borrow the money.”
A quarter of all seniors rely on Social Security for at least 90% of their income, according to AARP.
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The index that has been used to calculate benefits has been criticized by advocates for only reflecting price changes for gasoline, electronics and other products. This only reflects what the younger generations are spending their money on.
Critics are calling for the system to be more friendly to the elderly by putting more weight on items such as healthcare costs, which have increased more sharply than the overall inflation. Others have championed a less generous system in order to preserve the Social Security trust fund, which is on pace to run out of money by 2035.
If inflation had remained steady at 3% over 2010’s, Social Security would be 17% higher today.
When premiums for Medicare are factored in, the increase for cost-of-living gets wiped out. According to Johnson, Social Security recipients have declining standards of living because of these healthcare costs.
The cost-of-living adjustment is down this year compared with the previous year’s increase.