Americans collecting Social Security benefits are slated to receive a cost of living increase in 2020. Benefits will increase by 1.6%. The average retiree’s monthly benefit will increase about $24, from $1,473 to to $1,503.
Also, the Social Security tax on high earners will increase in 2020 by 3.6%. Those earning more than $137,700 will pay an additional $297 in taxes.
COLA adjustments are linked to the Consumer Price Index, and are designed to allow seniors’ spending power to keep pace with inflation. However, critics claim that the CPI is an inadequate guideline for calculating COLA, since the CPI is more closely tied to the spending habits of younger, urban workers. In contrast, retirees’ living expenses are more heavily weighted toward health care and drug costs, which have risen meteorically. A recent report from the AARP reveals that for the past 12 years, retail drug prices have increased beyond the general inflation rate. Another study by the Seniors Citizens League concludes that despite COLA adjustments, seniors’ purchasing power has actually fallen by 33% since 2000.