Seniors on Social Security will see their benefits increase by 1.3% come 2021. News of an official cost-of-living adjustment, or COLA, was announced this morning by the Social Security Administration.

That 1.3% COLA aligns with previous estimates made by the non-partisan Senior Citizens League and is 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. And while it's certainly better than no raise at all, it's the lowest seniors have gotten in four years, which is bad news at a time when so many older Americans are struggling due to the financial impact of the coronavirus pandemic.

Loose pile of Social Security cards

Image source: Getty Images.

How much more money will seniors actually get?

While a 1.3% COLA may seem negligible, it's somewhat comparable to the past year's 1.6% COLA, and it's certainly better than the 0% COLA seniors saw going into 2016. Still, with an average benefit of $1,519, the typical senior is now looking at less than $20 extra per month in light of today's news. Given that many Social Security recipients were already struggling to make ends meet, a meager COLA means some beneficiaries may have to start making difficult lifestyle choices -- downsizing their homes, relocating to cheaper parts of the country, or going back to work in some capacity, which is doable under normal circumstances, but during a pandemic, less so.

Furthermore, seniors on Social Security who are also enrolled in Medicare may not get to keep their entire raise. The reason? Medicare Part B premiums are expected to rise going into 2021, as they typically do from year to year, and so once the cost of those increases is deducted, seniors who pay their premiums directly out of their Social Security benefits will be left with even less money. Right now, we don't know the extent to which Part B premiums are going up, and thankfully, Social Security recipients are protected from exorbitantly high increases to a certain degree.

Thanks to Medicare's hold harmless provision, seniors who pay their Part B premiums directly out of their Social Security benefits can't see their benefits decrease due to Medicare increases. Or, to put it another way, a beneficiary who gets a $20 raise as a result of 2021's Social Security COLA can't be hit with more than a $20 monthly increase in Medicare premiums. Earlier in the year, the Medicare trustees predicted a Part B increase of $8.70 more a month for 2021, but that was before the coronavirus pandemic was factored into the equation.

Seniors on Social Security continue to struggle

It's estimated that seniors on Social Security have lost 30% of their buying power since 2000, and stingy COLAs are largely to blame. The whole purpose of COLAs is to allow seniors to live comfortably in spite of inflation, but given the way Medicare premiums and healthcare costs have risen through the years, it's clear that those COLAs have been falling short. And unfortunately, 2021's COLA is looking to be no exception.