How COLA Influences Your Monthly SSD Payments


The cost of living tends to increase every year, and many people thinking about applying for Social Security disability (SSD) benefits wonder if their payments will reflect this. Payment amounts that may be adequate one year may not be enough to live on the next, so does the Social Security Administration (SSA) make a cost-of-living adjustment (COLA) every year?

In short, yes. However, there are numerous stipulations.

How COLA Impacts Monthly SSDI Payments

According to the SSA FAQ, the administration increases beneficiaries’ payment amounts on an annual basis to protect against inflation. If there is a rise in the consumer price index, beneficiaries will see a COLA to their payments. The amount varies depending on the increase. The SSA gives the example that a yearly rise between third quarter 2017 and 2018 resultedin a COLA boost of 2.8% for 2019. The SSA usually announces the next year’s COLA increase in mid-October.

The SSA recently published its full list of COLAs for its various programs. The SSDI income threshold for nonblind beneficiaries is $1,220 a month this year, while it was $1,180/month previously. Blind beneficiaries have a higher threshold, with $2,040 a month this year compared to $1,970 in 2018. The average monthly SSD benefits for disabled workers before 2019’s COLA was $1,200, while after the 2.8% increase it is at $1,234 a month. Just $34 more a month may not seem like much, but it adds up and can make a significant difference to disabled Americans.

What Happens In Years Without a COLA Increase?

However, if there is no increase year to year, the SSA says there can be no COLA boost for beneficiaries. In addition, the SSA says some beneficiaries who are also enrolled in Medicare may see their monthly payments drop despite a COLA increase. According to the SSA, this only occurs when health care costs rise faster than the cost of living, and so higher Medicare premiums may cause monthly payments to seem to decrease. These benefits aren’t actually declining – your take-home payments just are because of Medicare.

COLA may make its way into the spotlight as government officials continue to talk about cutting Social Security because of declining funds. While COLA increases are essential to SSDI and other Social Security beneficiaries, the way such increases are calculated with a “chained” CPI is on its way out.

According to AARP, chained CPI often causes COLA to be lower because it uses a different formula. This formula assumes people will buy less expensive options when prices increase, meaning people often make do with fewer goods when costs rise rather than needing more money to live the same lifestyle. If COLA is calculated using a chained CPI, beneficiaries may see less of an increase in payments than they would have.

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