Social Security Benefits will be increased by 1.5% next yearDespite the current budget battles in Washington and a national debt that has reached 17,081,509,219,288, the Social Security Administration (SSA) announced today that they will increase the amount paid in Social Security benefits for 58 million people by 1.5 percent next year. This announcement was made by the government on Wednesday.
The cost of living adjustments or COLAs were adopted in 1975, and this will be the smallest automatic increase since that time. The reason: consumer prices haven't gone up much in the past year, and the annual cost-of-living adjustment is calculated based on a government measure of inflation.
According to a CNN report, The cost-of-living adjustment is based on the consumer price index for urban wage earners and clerical workers, 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.
This COLA, however, will be much less than the average increase which is generally around 4%. According to reports, this will be the seventh time the COLA has increased by less than 2%. Some years, however, there were no increases such as in 2010 or 2011. Other years the COLA has been erased because other costs, such as Medicare Part B premiums, have increased and then the cost has been deducted from Social Security payouts automatically.
Who will the Social Security Benefits increase affect?
The announcement of a Social Security benefits increase is great news for an estimated one-fifth of the country. But its not just SSA retirement recipients who will see an increase in their payments. It will also benefit millions of disabled veterans, federal retirees and people who get Supplemental Security Income or SSI which is paid to the blind, disabled and aged (65 years and older) who are unable to work and who have very limited income and resources.
The SSA also announced that the amount of wages subject to Social Security taxes is also going up. Currently SSA is funded by taxing the first $113,700 in wages earned by a worker at a 12.4 percent tax. Workers pay half the tax and employers pick up the remainder. Next year, however, the threshold will increase to $117,000. Wages above this amount, however, will continue not to be taxed.
How big is the Social Security benefits increase?
Although the Social Security benefits increase for the government will be high, the average worker who is earning $1,272 a month in benefits will only see an increase on average of about $19.
Proponents of the increase understand that the COLA is necessary to help disability recipients and retirees maintain their standing of living and protect them against inflation, but the $19 per month, according to AARP executive vice president Nancy LeaMond, will quickly be consumed by the rising costs of basic needs like food, utilities and health care."
The announcement about the Social Security benefits increases, which was scheduled weeks ago, was delayed because the Bureau of Labor Statistics did not issue the inflation report for September during the partial government shutdown.