Social Security Increase for Retirees, Disabled Persons and Surviving Spouses
Announced on October 19th, Social Security Benefits will see a Cost of Living Adjustment increase of 3.6 percent next year. This is the first increase in benefits since 2009. Starting in January 2012, 55 million Social Security recipients will get increases averaging $39 a month, or just over $467 for the year. In December, more than 8 million people who receive Supplemental Social Security Income, the disability program for the poor, will get increases averaging $18 a month, or about $216 for the year.
The annual Cost of Living Adjustment (COLA) is tied to an inflation measure. There were no COLA adjustments for 2010 or 2011 due to such a low rate of inflation. Those were the first two years there was no automatic COLA increase since they were enacted in 1975. Social Security recipients did however receive a one time $250 payment from the 2009 economic stimulus package.
Social Security Agency will pay out $727 billion in benefits to retirees, disabled people, surviving spouses and children this year. That makes the average payment $1,082 per person. The COLA adjustment will add between $25 and $30 billion more, giving retirees and disabled persons some additional spending money.
Unfortunately some of this increase will be lost to higher Medicare premiums, which are deducted from Social Security payment. Medicare Part B premiums are expected to rise in 2012, the new premium rates are expected to be announced some time this week.
Social Security Increase for Working Taxpayers
The maximum amount of wages subject to Social Security taxes is $106,800, this limit will increase to $110,100 in 2012.
In 2011 workers got a break on the amount of Social Security withheld from their paychecks, they were taxed at 4.2 percent down from the normal amount of 6.2 percent. The employer was still responsible for their portion, which remained at 6.2 percent.
The new rate for 2012 is unclear at this time, President Obama is pushing for another decrease to 3.1 percent, or it may remain at the lower 4.2 percent or revert back to 6.2 percent as it is scheduled under current law. AFS will keep you updated as soon as they announce the new rate for 2012.
People making $110,100 in 2011 will pay $4,486, if the rate reverts back to 6.2% in 2012 they will pay $6,826 or $2,340 more.
If the rate stays at 4.2% the will pay only $139 more and if it gets reduced to 3.1% they will pay $1,073 less than in 2011.