How to Prepare for a No-to-low 2021 Social Security COLA

Retirement Daily Guest Contributor

By Dr. William Reichenstein, CFA

There is a good chance the Social Security COLA for 2021 will be 0%. If not, it is likely to be low. (Based on consumer price index data through April, the Senior Citizen League estimated that there will be no COLA for Social Security benefits for 2021.)

How the Hold-harmless Provision Works for Social Security

There is a hold-harmless provision that protects most Social Security recipients from a decrease in their monthly Social Security payment (net of Medicare Part B premium). Consider someone who receives $1,000 gross in Social Security monthly benefits in 2020 and $885.40 after deducting the $144.60 per month standard Medicare Part B premium. If there is no COLA for 2021, then this person would likely continue to receive $885.40 per month in (net of Part B premium) Social Security benefits even if the Part B premium increases, which it is likely to do. Read about increases in Part B premiums and the hold-harmless provision.

The qualification of “likely” is as follows: The person must be 1) entitled to Social Security benefits for November and December of 2020, 2) Medicare Part B premiums must be deducted from this person’s Social Security payments for November 2020 through January 2021, and 3) this person must pay the standard Part B premium of $144.60 per month and not a higher Part B premium due to his or her high income (that is, an Income Related Monthly Adjustment Amount (IRMAA) does not apply).

Suppose we have a 0.5% COLA for 2021. Then the gross Social Security payment will be $1,005. If Medicare Part B standard premium increases by more than $5 per month then this person will continue to receive $885.40 in Social Security monthly benefits (net of the Part B premium).

Pay Part B Premiums Directly to Social Security

There is not a lot most individuals can do to avoid this problem. However, if they are paying for Part B premiums directly to Medicare then they should change this by November to makes sure the payment is deducted from their monthly Social Security check. Also, people who have Social Security premiums paid by Medicaid do not qualify for this hold-harmless provision. 

About the author: Dr. William Reichenstein, CFA

Dr. William Reichenstein, CFA, is the Head of Research at Social Security Solutions, Inc. and Retiree, Inc. and Professor Emeritus at Baylor University. 

Comments (4)
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Stan Bailey
Stan Bailey

Well, that is why I have retired outside of the USA to a country which costs 25% of living in the USA. However, for some unknown reason, Medicare is not available to any citizen living outside of the USA or one of the territories of the USA, i.e. Guam. Therefore, no need to pay the Medicare Part B expense, saving more money. Where I have chosen to live, is one of the best and cheapest medical health care in the world, with AMA certified Drs. and the best medical facilities. Very disappointing though to see SS using the wrong metrics to determine the annual COLA increases, or lack thereof. Also, do not understand why some of my fellow Americans in this country have US military health insurance coverage globally, but those of us without a military retirement having Medicare, do not have global coverage. Oh well, that is the decision of our lovely Congress politicians I guess.


Quick question -- can you please clarify the $114.60 standard Medicare Part B premium noted in the article? The 2020 standard premium is $144.60 -- not sure what this lower one is. Thanks in advance!

Social Security/Medicare