The government announced this morning that social security recipients, who number approximately 55 million Americans, will get a 3.6% cost of living adjustment, or COLA, starting in January 2012. 8 million Americans who receive Supplemental Security Income (SSI) will receive a 3.6% increase as well.
This will be the first COLA since 2009, when the increase was a rather large 5.8%. There were no increases in the COLA for 2009 and 2010, since the measured inflation rate during the weakened economy was too low to bring it above the rate measured in 2008 which was used for the 2009 increase. These were the 1st two years without an increase since automatic increases based on inflation were adopted in 1975.
Many people, particularly the elderly living on fixed incomes, have complained and struggled over the last two years, that while food, medical, and other costs have risen, their social security payments have not. In addition, it is expected that medicare premiums will increase next year, wiping out some of the SS increase for many.
Monthly social security payments average just under $1100 per month, so a 3.6% increase would mean the average payment would increase about $39 per month, or appx. $468 per year.
For the maximum monthly payment, currently $2366 per month, the increase would amount to approximately $85 per month, or $1020 per year.
On a related and interesting note, the amount of salary or wages subject to the social security tax will rise by the same percentage next year, from the current $106,800 to $110,100, according to the social security administration. For those subject to the increased threshold, this would mean an increase of appx. $225 according to my quick calculations.
Since the social security payroll tax cut for 2011 has yet to be extended for 2012, the increase in the amount subject to the ss tax as well as the potential for paying the 2% that was cut in 2011 could mean decent increase for some.
President Obama originally included an extension of the 2% SS payroll tax cut through 2012 in his jobs bill proposal which was DOA a few weeks back, however; he plans to continue pushing individual parts, including the payroll tax cut extension in 2012 as individual pieces. I’ll be sure to discuss if anything is announced in the near future, so stay tuned.
- Bush Tax Cuts to Be Extended Through 2012, Social Security Payroll Tax Reduced
- I Bond Rate for May 2011 through October 2011- 4.60 %
- I Bonds to Earn 0.0% From May to October, 2009
- I Bond Rate for May 2012 through October 2012- 2.20 %