SSDI payments rose 1.3% in 2021, the smallest raise in years

Yes, Social Security Disability Insurance (SSDI) payments increased in 2021. The Cost of Living Adjustment (COLA) for that year was 1.3%, which meant the average SSDI payment went up by roughly $20 per month. This was the smallest annual raise since 2017, and it reflected how inflation was measured in the months leading up to the announcement in October 2020.

The 1.3% increase applied to all SSDI beneficiaries on the rolls as of December 2020. If you were receiving SSDI in January 2021, your payment reflected this raise automatically—you did not need to do anything to receive it. The new payment amount appeared in your January 2021 deposit.

Understanding how COLA works and what it means for your benefits matters because the raise you get each year depends on a formula set by law, not on decisions made by Social Security staff. The same formula applies to all beneficiaries, regardless of how much you receive or how long you have been on SSDI.

Key Takeaways

  • The 2021 COLA of 1.3% was the smallest raise since 2017 and reflected inflation measured between July 2019 and June 2020.
  • COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a specific inflation measure that does not always match the inflation people experience in daily life.
  • The raise applied to your SSDI payment automatically in January 2021 with no action required on your part.
  • COLA also affects Medicare premiums, Supplemental Security Income (SSI), and other benefit programs, so a raise in SSDI may be partly offset by higher Medicare costs.

How the COLA formula works

COLA is not decided by Congress or the Social Security Administration each year. Instead, it is calculated using a specific measure of inflation called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Social Security compares the average CPI-W for the third quarter (July, August, September) of the current year to the average for the same quarter of the previous year. If inflation went up, beneficiaries get a raise equal to that percentage.

For 2021, the CPI-W rose 1.3% between the third quarter of 2019 and the third quarter of 2020. That percentage became the COLA for all benefits paid in 2021. The announcement happens in October, and the new payment amount takes effect in January.

If there is no inflation—or if inflation is negative—COLA can be zero or even result in no change to your payment. This happened in 2009, 2010, and 2016, when beneficiaries received no raise at all. By law, COLA cannot go backward, so your payment never decreases because of COLA, but it also does not always keep pace with the costs you actually face.

Why 1.3% was lower than previous years

The 2021 COLA of 1.3% was notably small because inflation between mid-2019 and mid-2020 was low. The period measured for the 2021 COLA included the early months of the COVID-19 pandemic, when prices for some goods fell (particularly gasoline and airfare) even as prices for other things rose. The overall effect was a modest increase in the CPI-W.

By comparison, the 2020 COLA was 1.6%, and the 2019 COLA was 2.8%. The 2021 raise was the smallest since 2017, when COLA was also 0.3%. Beneficiaries who rely on SSDI as their primary income often find that small raises do not cover the actual increases in rent, food, utilities, and medical costs they face year to year.

How COLA affects your total benefits picture

The 1.3% raise to your SSDI payment in 2021 was partly offset by changes to Medicare premiums. If you are receiving SSDI and enrolled in Medicare Part B (medical insurance), your premium increased in 2021. The increase in your SSDI payment may have been reduced or eliminated by the higher Medicare cost, depending on your specific situation and when you enrolled in Medicare.

This interaction between SSDI and Medicare is called the hold-harmless provision. It protects most beneficiaries from having their SSDI payment reduced because of a Medicare premium increase, but it does not protect everyone. If you enrolled in Medicare after 2015, or if you are a higher-income beneficiary, you may have seen your SSDI raise reduced by the Medicare premium increase.

If you also receive Supplemental Security Income (SSI), the COLA increase applied to that payment as well. However, SSI has different rules about how much you can earn and own in resources, so the raise may have affected your SSI amount differently than it affected your SSDI payment.

What changed in your January 2021 payment

Your SSDI payment in January 2021 reflected the 1.3% increase automatically. You would have seen the new amount in your bank account or on your payment stub if you receive a paper check. Social Security mailed notices to beneficiaries in December 2020 explaining the new payment amount and the reason for the change.

If you did not see an increase, or if your payment went down, contact Social Security to find out why. Possible reasons include a change in your work earnings (if you are working while on SSDI), a change in your family situation, or an error in your account. You can call Social Security at 1-800-772-1213 or visit your local Social Security office.

Keep in mind that the COLA increase is separate from any other changes to your benefit amount. If Social Security recalculated your benefit for any reason—such as a change in your Primary Insurance Amount or a change in your family composition—that recalculation would show up in the same payment, which can make it hard to see what the COLA increase actually was.

COLA and future SSDI payments

The 2021 COLA of 1.3% is now part of your ongoing SSDI payment amount. Every year going forward, your payment will be recalculated with a new COLA percentage. If inflation rises, your payment rises. If inflation is flat or negative, your payment stays the same (it does not go down).

The COLA for 2022 and beyond depends on inflation measured in the third quarter of each year. As of the time this article was written, future COLA percentages cannot be predicted because they depend on economic conditions that have not yet occurred. Social Security announces each year's COLA in October, and it takes effect the following January.

Frequently Asked Questions

Why was the 2021 COLA so small compared to what I spend on rent and food?

COLA is based on the CPI-W, which measures average inflation across a broad basket of goods and services. It does not account for the specific costs you face—such as rent, medical care, or utilities—which may have risen faster than the overall inflation rate. A 1.3% raise in your SSDI payment may not match the actual increases in your living expenses.

Did everyone on SSDI get the same 1.3% raise in 2021?

Yes, all SSDI beneficiaries received the same 1.3% COLA increase in January 2021. However, the dollar amount of the raise varied depending on how much each person was receiving. Someone getting $1,200 per month received a smaller dollar increase than someone getting $1,500 per month, even though both got the same 1.3% percentage increase.

What if my SSDI payment did not go up in January 2021?

Contact Social Security to find out why. Possible reasons include a change in your earnings, a change in your family situation, or an error. Call 1-800-772-1213 or visit your local Social Security office with your Social Security number and a recent payment stub.

Does the COLA increase affect SSI the same way it affects SSDI?

COLA applies to both SSI and SSDI, but SSI has different rules about how much you can earn and own. The 1.3% increase applied to the SSI federal benefit rate, but your actual SSI payment may have changed differently depending on your income and resources.

How does the Medicare premium increase offset the SSDI raise?

If you are enrolled in Medicare Part B, your premium is deducted from your SSDI payment. When the premium increased in 2021, the amount deducted from your payment went up. The hold-harmless provision protects most beneficiaries from having their SSDI payment reduced, but higher-income beneficiaries and those who enrolled in Medicare after 2015 may have seen their raise reduced or eliminated by the premium increase.