Bad News: Your 2021 Social Security COLA Will Probably Be Zero
Retirees face the financial struggle every day of having to live without a paycheck. With most people having only modest savings, Social Security is often responsible for most or all of what retirees receive every month. Knowing the importance of Social Security benefits, lawmakers arranged for the size of monthly payments to rise each year to cover the inevitable rising costs of living.
Unfortunately, these cost of living adjustments often aren't big enough to keep up with the particular costs that retirees have to pay. In some years, Social Security recipients didn't get any increase in their benefits at all. And based on what just happened in the financial markets -- and one market in particular -- prospects aren't looking good for those hoping to get a boost to their Social Security benefits at the beginning of 2021.
Every January, Social Security recipients see their payment amounts adjust based on a particular set of inflation figures from the U.S. government. The CPI-W measure of the Consumer Price Index is what the laws governing Social Security look at to determine a given year's COLA. The Social Security Administration looks at the CPI-W figures for July, August, and September, and then takes the three-month average over the period. It then compares that figure to the average over the same three months of the previous year. Whatever the percentage change is becomes the COLA that takes effect at the beginning of the next year.
Source Fool.com
