Social Security Benefits to Rise by 1.7% as Inflation Remains Low

social security benefitsBy STEPHEN OHLEMACHER

WASHINGTON -- More than 56 million Social Security recipients will see their monthly payments go up by 1.7 percent next year.

The increase, which starts in January, is tied to a measure of inflation released Tuesday. It shows that inflation has been relatively low over the past year, resulting in one of the smallest increases in Social Security payments since automatic adjustments were adopted in 1975.

This year, Social Security recipients received a 3.6 percent increase in benefits after getting none the previous two years.

About 8 million people who receive Supplemental Security Income will also receive the cost-of-living adjustment, or COLA, meaning the announcement will affect about 1 in 5 U.S. residents.

Social Security payments for retired workers average $1,237 a month, or about $14,800 a year. A 1.7 percent increase will amount to about $21 a month, or $252 a year, on average.

Social Security also provides benefits to millions of disabled workers, spouses, widows, widowers and children.

The amount of wages subjected to Social Security taxes is going up, too. Social Security is supported by a 12.4 percent tax on wages up to $110,100. That threshold will increase to $113,700 next year, resulting in higher taxes for nearly 10 million workers and their employers, according to the Social Security Administration.

Half the tax is paid by workers and the other half is paid by employers. Congress and President Barack Obama reduced the share paid by workers from 6.2 percent to 4.2 percent for 2011 and 2012. The temporary cut, however, is due to expire at the end of the year.

Some of next year's COLA could be wiped out by higher Medicare premiums, which are deducted from Social Security payments. The Medicare Part B premium, which covers doctor visits, is expected to rise by about $7 per month for 2013, according to government projections.

The premium is currently $99.90 a month for most seniors. Medicare is expected to announce the premium for 2013 in the coming weeks.

"If seniors are getting a low COLA, much of their increase will go to pay off their Medicare Part B premium," said Mary Johnson, a policy analyst at The Senior Citizens League.

By law, the increase in benefits is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, a broad measure of consumer prices generated by the Bureau of Labor Statistics. It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education.

The Social Security Administration compares the price index in the third quarter of each year - the months of July, August and September - with the same three months in the previous year.

If consumer prices increase from year to year, Social Security recipients automatically get higher payments, starting the following January. If prices drop, the payments stay the same, as they did in 2010 and 2011.

Since 1975, the annual COLA has averaged 4.2 percent. Only five times has it been below 2 percent, including the two times it was zero. Before 1975, it took an act of Congress to increase Social Security payments.

The COLA has played an important role in keeping older Americans out of poverty, said David Certner, AARP's legislative policy director. Most older Americans rely on Social Security for a majority of their incomes, according to the Social Security Administration.

Over the past decade, the COLA has helped increase incomes for seniors, even as incomes have dropped for younger workers.

From 2001 to 2011, the median income for all U.S. households fell by 6.6 percent, when inflation was taken into account, according to census data. But the median income for households headed by someone 65 or older rose by 13 percent.

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Associated Press reporter Christopher S. Rugaber contributed to this report.


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Gumby

Gas prices soared this month. Boost COLA again .

October 18 2012 at 6:24 PM Report abuse +1 rate up rate down Reply
chris1011

The Romney Business Model – after acquiring a solvent company, borrow heavily against its assets, throw workers under the bus, rob their pension fund (leaving taxpayers to pick-up the tab), avoid taxes by laundering profits through offshore banks, leverage company into receivership/ bankruptcy, liquated all material goods, generously reward investors, destroy surrounding neighborhood/community, and skip town - is eerily reminiscent of the scorched earth model Paul Ryan envisions for America.

Over two-thirds of the companies acquired by Bain are now shuddered, accounting for the loss of over 400,000 jobs (and billions in profit for Romney and parasitic “business partners”). I find it incomprehensible that workingclass conservatives – in direct opposition to their own best interest – vehemently support the Bain inspired Ryan Plan

October 17 2012 at 3:55 PM Report abuse rate up rate down Reply
wheresmyfreemoney

Inflation low, cost of living high.What a joke.
What ever happened to the summer of recovery one,two, and three?

October 17 2012 at 11:35 AM Report abuse +3 rate up rate down Reply
dus48

this is a joke.stop trying to fool people.we are going off the fiscal cliff.if you want to beleive it the fiscal cliff is looming.all the fabrications will not alter that.we are in debt to china and not a thing is being done.unfair trade practices which has been escalating.our heroes who lost their lives in libya.the entire episode is a sham.hillary clinton had to take the blame.what happened to the rest of them.

October 17 2012 at 11:03 AM Report abuse +3 rate up rate down Reply
Edward Wilkes

Every time an increase is given The first thing that happens is: #1) The government rounds down to the nearest $dollar amount - meaning that if your increase lets say is $21. 85, Well as you know the 85cents vanishes making the increase $21. Say you have been receiving benefits for 10- 15years, Well you have been robbed of an significant amount of earnings, the true amount of raises based on actual earnings that you never got in the first place (All Those Cents) that would have increased your earning $DOLLARS$...#2) Because of the Cola Raise your medicare buy ins go up (Medicare is not free) you pay - Because of your tiny little raise (Your Food Stamps "Snap" goes down)...If you are on section8 housing - Your part of the rent goes up. YOU LOOSE! HAHA...

October 17 2012 at 10:34 AM Report abuse +2 rate up rate down Reply
coochiescooter

Excellent post tjdwill007, now let's see if the libtoons understand it. I really doubt it.

October 17 2012 at 10:12 AM Report abuse rate up rate down Reply
paulw3tzi

Last years numbers mean nothing. The price we pay for food is NOW not last years. The fed spin doctors are having a ball with those bogus numbers. Fool the public long enough and they will start to believe it.

October 17 2012 at 10:05 AM Report abuse +1 rate up rate down Reply
tcbdvd

The government has exempted fuel and food from the inflation figures. It's actually about 14% per year. Gas has doubled as well as many food prices gone up over 50%.

October 17 2012 at 10:00 AM Report abuse +3 rate up rate down Reply
Jerry

Man I'm takin' my $25 and buyin' me some, some, something for $25.

October 17 2012 at 9:35 AM Report abuse +1 rate up rate down Reply
jbjg24m

the cost of the medicar payment will eat this up right away, so no increase in ones check

October 17 2012 at 8:38 AM Report abuse +4 rate up rate down Reply
1 reply to jbjg24m's comment
Bernie

I am glad I am not the only one that sees this. Nothing from nothing is NOTHING

October 17 2012 at 9:46 AM Report abuse +3 rate up rate down Reply