Some 55 million Social Security recipients will get a 3.6 percent increase in benefits next year, their first raise since 2009. Hit the jump to read the rest of the story.
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The increase, which starts in January, is tied to a measure of inflation released Wednesday morning.
About 8 million people who receive Supplemental Security Income will also receive the 3.6 percent cost-of-living adjustment, or COLA, meaning the announcement will affect about one in five U.S. residents.
There was no COLA in 2010 or 2011 because inflation was too low. Those were the first two years without a COLA since automatic increases were adopted in 1975. However, Social Security recipients did receive a one-time $250 payment from the economic stimulus package passed in 2009.
Monthly Social Security payments average $1,082, or about $13,000 a year. A 3.6 percent increase will amount to about $39 a month, or just over $467 a year, on average.
Advocates for seniors said the raise will provide a much-needed boost to the millions of retirees and disabled people who have seen retirement accounts dwindle and home values drop during the economic downturn. Economists say the increase should provide a modest boost to consumer spending, which should help the economy.
Still, many seniors feel like they have been falling behind.
Nancy Altman, co-chair of the Strengthen Social Security Campaign, said she is pleased Social Security recipients will get a raise next year. But, she added, “The COLA is still not enough to keep up with health care costs.”
“Despite the absence of a Social Security COLA, over the last two years out-of-pocket health care costs rose 14.1 percent for seniors and people with disabilities, effectively reducing the value of Social Security benefits,” Altman said.
Most retirees rely on Social Security for a majority of their income, according to the Social Security Administration. Many rely on it for more than 90 percent of their income.
“For many of our seniors, the creeping costs of medical care, food and housing have forced them to stretch their limited incomes to the breaking point,” said Rep. Xavier Becerra of California, the top Democrat on the House Social Security subcommittee. “And after two years without any cost-of-living increases, our seniors are getting some much-needed relief.”
Some of the increase in January will be lost to higher Medicare premiums, which are deducted from Social Security payments. Medicare Part B premiums for 2012 are expected to be announced next week, and the trustees who oversee the program are projecting an increase.
The amount of wages subject to Social Security taxes will also go up next year. This year, the first $106,800 in wages is subject to Social Security payroll taxes. Next year, the limit will increase to $110,100, the Social Security Administration said.
Of the 161 million workers who will pay Social Security taxes next year, about 10 million will get a tax increase from the change, the agency said.
