Social Security recipients will get $20 more each month in 2021
Social Security and disability benefits will rise by 1.3% next year, with the average monthly benefit increasing by $20 to $1,543 from $1523, according to the Social Security Administration.
The increase accounts for the rise in inflation and is calculated by assessing the change in the consumer price index from the third quarter of 2019 to the third quarter of 2020.
Read more: Social Security, Medicare, and retirement benefits: How they work
The 64 million Americans receiving regular Social Security benefits will see the increase starting January 2021. Increased payments for the 8 million Americans who receive Supplemental Security Income (SSI) benefits will start December 31, 2020.
The SSA will notify beneficiaries by mail in early December about the increased benefit amount. You can also check out the new amount through your personal Social Security account online.
For workers, the maximum amount of earnings subject to the Social Security tax also increased to $142,800 from $137,700. This also goes into effect in January.
The SSA uses the consumer price index for urban wage earners and clerical workers, or CPI-W. This is a monthly measure of the average change over time in the prices paid by urban wage earners and clerical workers for a market basket of consumer goods and services.
Read more: Read more: Here's how to recession-proof your retirement plan
While CPI-W has long been the traditional measure determining this benefit increases, experts — as well as presidential candidate Joe Biden — have advocated for the benefit to track the CPI-E, the consumer price index for the elderly, which is based on spending by adults age 62 and older. This weighs health care spending more and increases faster than the CPI-W.
The Bureau of Labor Statistics has also calculated that medical services increased at a 5% rate in the past year as well as the cost of home-care rising 4%. The benefit bump may not be enough to accommodate these cost increases.
Dhara is a reporter Yahoo Money and Cashay. Follow her on Twitter at @Dsinghx.
Social Security 'insurance:' Company offers product to protect against surplus running out
Most Americans didn’t tamper with their retirement savings even in pandemic, study finds
President Trump's promises to prevent evictions offers ‘false hope,’ experts say
Read the latest financial and business news from Yahoo Finance and Yahoo Money
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.