Social Security COLA Changes Since 1975: How They Affect SSD Benefits

Social Security COLA changes since 1975

In 1975, the Social Security Administration began reviewing the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The SSA does this to determine annual cost-of-living adjustment changes (COLA) for disability beneficiaries. Think of this adjustment as a small “raise” for people’s monthly disability checks. Social Security COLA changes varied significantly over recent decades. However, some years didn’t see any COLA updates at all. It’s interesting to track these Social Security COLA changes, since they impact millions of Americans.

Is There a Social Security COLA Change Coming in 2020?

Yes! Unfortunately, this year’s Social Security COLA increase (1.6%) isn’t as large as the one we saw last year (2.8%). Here’s how next year’s COLA affects anyone currently approved for federal disability payments:

  • SSDI beneficiaries – maximum monthly payment goes up to $3,011; average disabled worker payment increases to $1,258/month. The average disabled worker with a spouse and one or more dependent children will see their SSDI benefits rise to $2,176/month.
  • SSI beneficiaries – maximum monthly individual benefit rises to $783/month; for couples, it’s $1,175/month.

Expect to see your increased benefit payment on the first, second or third Wednesday in January 2020 (depending on your birth month).

How Did the SSA Calculate This Latest Social Security COLA Change?

Social Security COLA equals index growth from the highest Q3 average CPI-W recorded (usually the previous year) to the average CPI-W for Q3 this year. In plain English, the CPI tracks inflation and how much prices changed over 12 months. Let’s say in 2018, gas cost $2.46 per gallon. But in 2019, I paid $2.50 per gallon for gas. The CPI-W averages how much that gas cost consumers in every U.S. state. Then, the CPI-W converts that number into a percentage. (This annual CPI calculation also includes average price for services and wages in the U.S.)

This means in September 2019, people that track CPI-W saw average prices go up about 1.6% over September 2018 prices. So in October 2019, the government approved a 1.6% Social Security COLA raise. This 1.6% higher Social Security COLA payment is effective from December 31, 2019 through December 31, 2020. If average prices for goods, services and wages fall or stay the same, there’s no Social Security COLA increase. But if prices go up, then Social Security COLA rises again.

Before 1975, legislation set any increase in disability benefit payments. Since 1975, the SSA uses the CPI-W to determine any annual Social Security COLA changes.

Why Isn’t There A Social Security COLA Raise Every Single Year?

You’re probably thinking, “prices still keep going up every year. Why don’t my benefit payments go up, too?” Here’s why: If average prices go down or stay the same the next year, there’s no Social Security COLA increase. Here are the most recent years without a COLA increase (or payments rose less than 1%):

  • 2009
  • 2010
  • 2015
  • 2016 (.3% increase)

To see each year’s Social Security COLA change percentages, take a look at this table on the SSA’s website.

Tracking Higher COLA Changes From Decades Past

When these Social Security COLA adjustments began in the mid-1970s, they were significant. Annual inflation was extremely high in the 1970s (much higher than it is today). So, any Social Security COLA changes reflected that high inflation rate. For example, in 1975, benefits rose 8% over the previous year. Then in 1979, they increased another 9.9%. Social Security COLA saw a record 14.3% increase in 1980, then that amount rose another 11.2% in 1981. Since that first decade using the new CPI-W calculation formula, most Social Security COLA increases seemed steady, but fairly low. Throughout the 1980s, Social Security COLA rose between 1%-4% every year. The biggest COLA increases since then happened in 1990 (5.4% increase) and 2008, which saw a 5.8% raise in benefits.

With no measurable COLA changes from 2015-2016, many disability beneficiaries welcomed the last two years’ increases. According to the SSA, the new Social Security COLA change adds $24 in monthly Social Security retirement benefits, on average. That brought the average Social Security payment up from $1,479/month in 2019 up to $1,503 in 2020. For SSD beneficiaries, average payments will rise from $1,238/month in 2019 to $1,258 in 2020.

Which Years Had The Highest Social Security COLA Raises Since 1975?

Since 1980, only a handful of years saw Social Security COLA increases that were higher than 4%. Below, we’ve listed the highest COLA increase years going back to 1975:

  • 1975: 8%
  • 1976: 6.4%
  • 1977: 5.9%
  • 1978: 6.5%
  • 1979: 9.9%
  • 1980: 14.3%
  • 1981: 11.2%
  • 1982: 7.4%
  • 1987: 4.2%
  • 1989: 4.7%
  • 1990: 5.4%
  • 2005: 4.1%
  • 2008: 5.8%

If you average each year’s COLA going back to 1975, it’s 3.7%. Since 2000, the average increase is just 2.15%. Over the last decade, that average shrank to just 1.52% going back to 2010.

Whose Benefits Go Up With Every COLA Increase?

Each year’s COLA impacts retired workers receiving Social Security payments, those receiving Supplemental Security Income (SSI) and disabled veterans. Social Security COLA doesn’t directly impact federal military retirement program benefits. However, these programs use the same timeframe and measuring formula as the SSA to compute the next year’s payment amounts.

About 73.2% of benefits paid from the Social Security Administration go to retired workers, their spouses and children. Another 14.5% goes to disabled workers, their spouses and children. Lastly, 12.3% of Social Security benefits go to surviving relatives of deceased workers.

More than one in four 20-year-olds today will become too disabled to work before their full retirement age. Yet in June 2019, just 3% of Americans received Social Security disability benefits. More than 5x as many Americans (about 54 million people) currently receive Social Security retirement or survivors’ benefits.

You May Qualify for Legal Assistance

Wondering if you might qualify for SSD benefits this year? Many applicants find the claim paperwork confusing. Plus, federal law bans you from taking home these forms to fill out when it’s convenient. That means you have to sit in your local SSA office for hours and apply in person. Or, you’ll have to call the SSA 1-800 number and hope the agent gets your info correct over the phone.

We can connect you with a Social Security lawyer happy to answer your questions for free. Unless you have a terminal illness, a lawyer will always improve your chances of winning benefits. These lawyers always work on contingency, so they get paid nothing unless you win benefits. On average, just 19% of first-time disability applicants got approved last year. But if a lawyer files your disability application, you’re 2x more likely to get benefits approved on your first try! Plus, you’ll owe that lawyer $0 if the SSA doesn’t approve you for benefits. And if your case wins, then you’ll only pay a small, one-time fee.

Ready to see if you may qualify? Click the button below to start your free disability benefits evaluation now.

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