The cost of living adjustment (COLA) will increase Social Security benefits by 1.6 percent in 2020, an average of about $24 per month for individuals, the Social Security Administration.
The increase for 2020 is notably less than the 2.8 percent bump received this year, but higher than the average over the past decade (1.4 percent).
The COLA will boost the average Social Security retirement benefit for a single person by $288 per year. The average retirement check is expected to be $1,479 in December 2019 before the COLA raises the benefit to $1,503 a month later, according to the administration.
“Social Security is the largest source of retirement income for most retirees, so this announcement of a 1.6 percent COLA increase, while modest, will help Social Security beneficiaries and their families as they try to keep up with rising prices,” AARP Chief Executive Officer Jo Ann Jenkins says. “Social Security’s annual COLA amount typically does not keep pace with all the increases in living expenses that most seniors face, including the costs of housing, food, transportation and, especially, health care and prescription drugs. AARP’s recent Rx Price Watch report found that retail drug prices increased by twice the rate of inflation during 2017, and have exceeded the inflation rate for at least 12 consecutive years.”
Social Security is paid for by a payroll tax on workers’ wages. Next year, the maximum amount of earnings subject to the Social Security tax will increase from $132,900 to $137,700.
The Social Security program does face long-term funding challenges. According to the 2019 annual report from the Social Security and Medicare Board of Trustees, the trust fund reserves that help pay for Social Security benefits will be fully depleted in 2035, unless Congress passes new legislation. Once those funds are exhausted, the program would only be able to pay out 80 percent of what each beneficiary should be getting.
“AARP will continue our advocacy for bipartisan solutions to help ensure the long-term solvency of the Social Security program, as well as adequate benefits for recipients,” Jenkins says. “We will also continue to fight for lower health care and prescription drug costs, which are eating up a growing share of Social Security benefits.”
For information about Social Security benefits and claiming strategies, those approaching retirement age may visit AARP’s Social Security Resource Center
Meanwhile, on November 8, 2019, the Centers for Medicare & Medicaid Services (CMS) released the 2020 premiums, deductibles, and coinsurance amounts for the Medicare Part A and Part B programs.
Medicare Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and certain other medical and health services not covered by Medicare Part A. The Part B premium could affect individual Social Security benefits because it is deducted directly from benefit payments.
Each year the Medicare premiums, deductibles, and copayment rates are adjusted according to the Social Security Act. For 2020, the Medicare Part B monthly premiums and the annual deductible are higher than the 2019 amounts. The standard monthly premium for Medicare Part B enrollees will be $144.60 for 2020, an increase of $9.10 from $135.50 in 2019. The annual deductible for all Medicare Part B beneficiaries is $198 in 2020, an increase of $13 from the annual deductible of $185 in 2019.
The increase in the Part B premiums and deductible is largely due to rising spending on physician-administered drugs. These higher costs have a ripple effect and result in higher Part B premiums and deductible.