Last Updated:April 20 @ 07:32 am

Social Security benefits to go up by 1.7 percent

By Stephen Ohlemacher

WASHINGTON (AP) - 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, despite the recent surge in gas prices, resulting in one of the smallest increases in Social Security payments since automatic adjustments were adopted in 1975.

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 recipients received a 3.6 percent increase in benefits this year 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 also provides benefits to millions of disabled workers, spouses, widows, widowers and children.

"The annual COLA is critically important to the financial security of the (56) million Americans receiving Social Security benefits today," said Nancy LeaMond, AARP's executive vice president. "Amid rising costs for food, utilities and health care and continued economic uncertainty, the COLA helps millions of older Americans maintain their standard of living, keeping many out of poverty."

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.

Over the past year, housing costs have gone up 1.4 percent but home energy costs have dropped by 3.8 percent, according to the CPI-W. Medical costs, which tend to hit seniors harder than younger adults, have increased by 4.4 percent.

Gasoline prices have climbed by 6.8 percent, but much of that increase happened in the past month, so it is not fully reflected in the COLA for Social Security.

To calculate the COLA, the Social Security Administration compares the average price index for July, August and September with the price index for the same three months in the previous year. The price index for September - the final piece of the puzzle - was released Tuesday.

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.

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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10 Comments

  1. agent007Comment by agent007
    October 16, 2012 @ 2:15 pm

    Great news for all benefit recipients of course!

    I was I was that lucky! With my middle class job, I have not seen any inflation correction added to my wages in the last 5 years!

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    • bna42Comment by bna42
      October 16, 2012 @ 2:36 pm

      It’s not that great because as usual the Medicare premiums will go up again and almost wipe out the raise most seniors get. I heard a few days ago that Medicare premiums will increase by at least $7, so the “average” recipient can expect around $14 increase on their check. The cost of surviving has increased much more than $14 per month, but the index that the COLA is tied to doesn’t take a lot of inflation into account.

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    • agent007Comment by agent007
      October 16, 2012 @ 2:38 pm

      Very true bna42, but of course this increase will allow Obama tonight to claim how is looking out for his voters! :)

      Another example of Obama using our tax money for political purposes!

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    • Bayushi ZeroComment by Bayushi Zero
      October 16, 2012 @ 5:15 pm

      You assume that those receiving SSI benefits (particularly the disabled) are somehow in the Middle Class?

      I am permanently disabled. My state (unlike states like California) only provides the bare minimum in SSI: $698 per month. Or, $8,376 a year. The poverty line for a single adult household is $11,170 per year.

      So I’m almost three grand below the poverty line, as are most adults subsisting on SSI.

      Get your head out of your arse.

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    • agent007Comment by agent007
      October 16, 2012 @ 5:55 pm

      Bayushi Zero:

      No I don’t count you in the middle class, and I feel for you, you sure got the short end of the stick, through no fault of your own, and I would hope that something could be done to improve situations for people in your situation!
      I bet that disabled people do require more funding than those that are more fortunate to live a reasonable life!
      The fact that our SS does not seem to take that into account is a real problem!

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    • cfhardersonComment by cfharderson
      October 16, 2012 @ 7:02 pm

      Bayushi Zero
      That is rough. For you to be covered by only SSI, you must have not had enough covered quarters for Social Security disability. Are your medical costs covered by Medicaid? In most states, SSI beneficiaries are automatically eligible for Medicaid. Do you qualify for Medicaid in your state ? If so, what is the value of that benefit?

      My brother was covered by Social Security disability and received about $1,200/month. “The worker will get Medicare coverage automatically after receiving disability benefits for two years.” His health insurance premium was $600/month with the added expenses of co-payments. This gave him less than $7,200 per year to live on. He died one year and eleven months after receiving SS disability – only one month before his Medicare benefit would start. After that his income would have effectively doubled.

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    • bna42Comment by bna42
      October 16, 2012 @ 7:22 pm

      “The fact that our SS does not seem to take that into account is a real problem.”

      In a round about way, Social Security does take disability into account. If a person takes early retirement at 62, he only gets 75% of his full benefit if he had waited until full retirement age. But if a person who is not near retirement age and becomes disabled, his disability benefit will be about the same as what he would have received at full retirement age, and then when he reaches 65, the individual is moved from disability to regular SS retirement but his benefit amount does not change. This may be one reason that the SS admin. has decided to move you from disability to regular retirement, along with the fact that disability is paid half by SS and half by the state.

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  2. pistol packing mamaComment by txgoatlady
    October 16, 2012 @ 3:01 pm

    “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.”

    Letting tax cuts expire is essentially a tax increase. I thought this was a dumb cut to begin with since SSI was already becoming insolvent, but people have gotten used to the reduced tax. This is a tax increase on every income bracket, including the middle class that Obama claims to want to protect. Does he intend to extend this cut if reelected? I guess at that point he is a lame duck and can raise everyone’s taxes.

    I actually moved the savings to my 401K for the past two years. I didn’t want to get used to having any extra money. Of course, even if I had kept it, it would have gone to gas and groceries. Inflation (much higher than the government claims, IMO) has essentially resulted in a pay cut for everyone.

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  3. cfhardersonComment by cfharderson
    October 16, 2012 @ 4:44 pm

    This increase (1.7%) “shows that inflation has been relatively low over the past year, despite the recent surge in gas prices, resulting in one of the smallest increases in Social Security payments since automatic adjustments were adopted in 1975″.
    This is still more than the 2010 & 2011 COLA increases of 0.00%. The COLA increase was 3.6% for 2012. This is an average of 1.325% per year for the four years. Historically, are these the smallest COLA increases for four consecutive years ?

    During that same time, what happened to the salaries for members of the US House of Representatives and the US Senate ? Do those members of Congress pay into the Social Security system or do they have their own retirement system ? What was the increase in benefits to that Congressional retirement system over the years 2010 through 2013? Members of the US Congress should be included in the same retirement system as the rest of us – Social Security with the same optional buy-in programs of 401K’s, IRA’s and/or TSA’s.

    A monthly Medicare premium of about $100 is only 22% of my currently monthly health insurance premium of $450. I don’t know the cost of a Medicare Supplemental but it should be less than $350. So I will save some money there. UNLESS

    HMMMMM, how would these health care rates change if Medicare is changed to a voucher system?

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    • bna42Comment by bna42
      October 16, 2012 @ 7:10 pm

      “Do those members of Congress pay into the Social Security system or do they have their own retirement system?”

      TX, the answer is BOTH. Congress critters are enrolled in the Federal Employees Retirement Fund, but also in the 90′s, the law was changed so that these critters also have to pay Social Security taxes. That’s only fair since they are the ones who caused the problem with Social Security. They have been warned for decades that SS is heading for bankruptcy, but they have failed to address the situation and kept on using F.I.C.A. taxes to fund their pet projects.

      Recently there was discussion about people who don’t need social security benefits to forego them. No one in Congress “needs” social security because most of them are wealthy.

      “During that same time, what happened to the salaries for members of the US House of Representatives and the US Senate?”

      Their salaries increased every year because the increases are AUTOMATIC. They have the option to vote not to accept the increase, but they seldom do that. It seems that the second year Social Security got 0% COLA, they complained enough that Congress didn’t accept their raise, but that was nothing but symbolic to quieten the natives.

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