AARP’s recent article, “Social Security Benefit Will Increase 1.6 Percent in 2020,” reports that the increase for 2020 is less than the 2.8% increase in 2019. However, it is more than the average over the past decade (1.4%).
The cost of living adjustment (COLA) will increase 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.
Social Security is the biggest source of retirement income for most retirees. That said, the announcement of a 1.6% COLA increase will help Social Security beneficiaries and their families as they try to keep up with rising prices.
The Social Security's annual COLA amount typically doesn’t keep pace with all the increases in living expenses that most seniors have, such as expenses like housing, food, transportation and, especially, health care and prescription drugs.
AARP reports 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. In 2019, the maximum amount of earnings subject to the Social Security tax will increase from $132,900 to $137,700.
However, 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 a new law.
When that money is gone, the program would only be able to pay out 80% of what each beneficiary should be receiving.
Reference: AARP (October 10, 2019) “Social Security Benefit Will Increase 1.6 Percent in 2020”