The 2021 COLA raised SSDI payments by 1.3 percent

In October 2020, the Social Security Administration announced that the 2021 cost of living adjustment would be 1.3 percent. This meant that starting in January 2021, every person receiving SSDI got a 1.3 percent increase to their monthly benefit amount. The increase was smaller than the previous year's adjustment and reflected slower inflation in the economy during 2020.

The 1.3 percent figure came from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which Social Security uses to measure inflation each year. Because inflation was low during the period measured for the 2021 adjustment, the raise was modest. A person receiving $1,000 per month would have seen their payment rise to $1,013 starting January 2021.

Key Takeaways

  • The 2021 COLA of 1.3 percent took effect in January 2021 and applied to all SSDI beneficiaries automatically, with no action required on your part.
  • Your new payment amount appeared in your January 2021 direct deposit or check; Social Security mailed notices in December 2020 showing the exact dollar increase.
  • The 1.3 percent figure was calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers, which measures inflation across the economy.
  • If you were working and earning over the substantial gainful activity limit, the COLA still applied to your benefit amount, though you may not have received the full payment that month.

How the 2021 COLA was calculated

Social Security calculates the annual COLA by comparing the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of one year to the third quarter of the previous year. For the 2021 adjustment, this meant comparing July, August, and September 2020 to July, August, and September 2019. The index showed that prices had risen 1.3 percent over that 12-month period.

This method has been in place since 1975. It measures inflation across a broad range of goods and services that working people buy — food, housing, transportation, medical care, and utilities. The index does not measure inflation for retirees or disabled people specifically; it uses the same measure for all three groups that receive automatic adjustments (SSDI, SSI, and Social Security retirement benefits).

The 1.3 percent increase was lower than the 2020 COLA of 1.6 percent and much lower than the 2019 COLA of 2.8 percent. The decline reflected the fact that inflation slowed during 2020, partly because of reduced demand for goods and services during the pandemic.

When the 2021 COLA took effect and how you received it

The 2021 COLA became effective on January 1, 2021. If you received SSDI by direct deposit, the new amount appeared in your bank account on the third of January 2021 (or the next business day if the third fell on a weekend or holiday). If you received a paper check, the January check reflected the new amount.

Social Security mailed a notice called the "Social Security Benefit Statement" to all beneficiaries in December 2020. This notice showed your old monthly benefit amount, the new monthly benefit amount, and the dollar increase. You did not need to do anything to receive the increase — it happened automatically for everyone on the SSDI rolls.

If you were subject to work incentives or earnings limits, the COLA still applied to your benefit amount. However, if you were working and your earnings exceeded the substantial gainful activity limit for 2021 ($1,470 per month for non-blind individuals), you may not have received a payment that month or your payment may have been reduced. The COLA increased your benefit amount, but it did not change how work incentives or earnings rules applied to you.

Why 2021's adjustment was smaller than previous years

The 2021 COLA of 1.3 percent was one of the smallest adjustments in recent history. To understand why, it helps to know what drives the Consumer Price Index. When prices for food, gas, housing, and other necessities rise faster than usual, the COLA goes up. When inflation slows, the COLA shrinks.

During 2020, inflation was unusually low. Demand for goods and services dropped sharply in the spring because of pandemic lockdowns. Prices for gasoline and airline tickets fell. Restaurants and hotels were closed or operating at reduced capacity. These factors kept the overall inflation rate low during the third quarter of 2020, which is the period Social Security used to calculate the 2021 adjustment.

By contrast, the 2022 COLA would be 5.9 percent — the largest adjustment in 40 years — because inflation accelerated sharply in late 2021 and early 2022. The 2021 adjustment reflected economic conditions at a specific moment in time, not a prediction of what would happen next.

What the 2021 COLA meant for your benefit amount

The 1.3 percent increase was applied to your full primary insurance amount, which is the benefit amount Social Security uses to calculate your payment. If you were receiving SSDI as a disabled worker, the increase applied directly to your monthly check. If you were receiving benefits as a family member of a disabled worker (a spouse or child), your payment also increased by 1.3 percent.

The increase did not change any other aspect of your benefits. It did not affect your Medicare coverage, your Medicaid status (which varies by state), or your may be able to access for other programs. It did not change the rules about how much you could earn while receiving benefits, and it did not change the process for reporting your work or income.

For someone receiving $1,200 per month in 2020, the 2021 COLA meant an increase of about $15.60 per month, bringing the total to $1,215.60. For someone receiving $800 per month, the increase was about $10.40 per month. The dollar amount of the increase was proportional to the benefit amount you were already receiving.

How to verify your 2021 benefit amount

You can check your current benefit amount by logging into your my Social Security account at ssa.gov. You will need to create an account if you do not already have one. Once logged in, you can view your benefit payment history, which shows the amount you received each month.

If you received a paper notice in December 2020, that notice showed your 2021 benefit amount. You can also call Social Security at 1-800-772-1213 to speak with a representative who can confirm your current payment amount. Have your Social Security number ready when you call.

If your January 2021 payment did not reflect a 1.3 percent increase and you believe it should have, contact Social Security to report the discrepancy. Keep a record of what you received and what the December 2020 notice said you should receive. This information will help Social Security investigate the issue.

Frequently Asked Questions

Did I have to do anything to get the 2021 COLA?

No. The COLA was applied automatically to all SSDI beneficiaries. You did not need to contact Social Security, fill out a form, or take any action. The increase appeared in your January 2021 payment.

Why was the 2021 COLA so small compared to 2022?

The 2021 COLA of 1.3 percent reflected inflation during the third quarter of 2020, when the pandemic had reduced demand for goods and services. The 2022 COLA of 5.9 percent reflected much higher inflation in late 2021 and early 2022. Each year's adjustment is based on inflation during a specific three-month period, not on predictions of future inflation.

Does the COLA affect how much I can earn while receiving SSDI?

No. The COLA increases your benefit amount, but it does not change the substantial gainful activity limit or any other earnings rule. In 2021, the SGA limit remained $1,470 per month for non-blind individuals, regardless of the COLA increase.

What if I think my 2021 COLA was calculated incorrectly?

Contact Social Security at 1-800-772-1213 with your benefit statement from December 2020 and your January 2021 payment information. A representative can review your account and explain how the adjustment was applied to your specific benefit amount.