Earlier this year, it seemed as though seniors on Social Security would have no shot at getting a cost-of-living adjustment, or COLA, for 2021. COLAs are based on third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures changes in the cost of common goods and services.

When gas prices dropped drastically back in March and April, analysts were quick to predict that the CPI-W wouldn't move enough to allow for a 2021 COLA. But things changed over the summer, and the Senior Citizens League, a well-known advocacy group, is now projecting that Social Security beneficiaries will be in line for a 1.3% raise next year.

Of course, a 1.3% raise is better than nothing -- but it's hardly generous. In fact, if that number sticks, the average senior on Social Security will get less than $20 more on a monthly basis. And that's hardly cause for celebration.

Older man sitting at kitchen counter, looking at documents

Image source: Getty Images.

Another stingy COLA

In late 2019, seniors were informed that they'd be looking at a 1.6% COLA going into 2020 -- and that was considered pretty bad news at the time. The fact that seniors are looking at an even smaller raise for 2021 is therefore far from encouraging, especially when we do the math to determine how much money that will actually put in seniors' pockets.

The average monthly Social Security benefit today is $1,519 a month. When we apply a 1.3% COLA, we get $19.75. Of course, that may not be an exact estimate, because next year's Social Security COLA could come in slightly higher or slightly lower than 1.3%. But all told, the average senior is looking at just about $20 extra a month -- and that's in a best-case scenario that likely won't come to be.

Why so? Medicare premiums tend to rise from year to year, and when they do, they can eat into COLAs. Social Security recipients who pay their Medicare premiums out of their benefits directly are protected from severe hikes, to some degree. Specifically, Medicare premiums can't increase to the point where a senior gets a lower Social Security benefit from one year to the next. If premiums this coming year increase by $24.75, but a given senior only gets an extra $19.75 in benefits, that extra $5 in Medicare costs will be forgiven, so that person's monthly benefit will not go down. But still, Medicare premium increases can take away from or even eliminate COLAs, which is why seniors can't even count on that roughly $20-a-month raise.

The Social Security Administration announces the program's annual COLA in October, so that news should be coming through pretty soon. Once it does, seniors will be able to calculate their exact raise to some degree -- but until details on Medicare increases come through, those numbers will be imperfect.

The only exception is for Social Security beneficiaries who aren't on Medicare. Those who still have group health coverage through an employer or another type of health insurance won't have to worry about Part B premium increases robbing them of what's likely to be a meager raise to begin with.