Social Security sets 3.6% cost of living increase
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As the future of Social Security continues to be a contentious political issue, officials Wednesday announced a 3.6% cost of living increase, the first such automatic hike since 2009.
According to the Social Security Administration, 55 million elderly will receive the 3.6% hike in January, while 8 million beneficiaries in the Supplemental Security Income program will receive the same increase as of Dec. 30. The increases are the first since 2009, when 5.8% was given out.
The cost-of-living adjustments, called COLAs, are designed to protect recipients from losing purchasing power from rising inflation. No increases were given out in the last two years because inflation was too low, though recipients did receive a $250 payment from the 2009 federal stimulus package.
The monthly Social Security payment varies depending on factors such as the age of retirement, but the average payment is about $1,082, according to the government. That would make the average increase about $39 a month.
Using slightly different numbers, the National Committee to Preserve Social Security & Medicare praised the COLA hike, but warned it could be offset by expected increases in Medicare, the healthcare program for the elderly. The new Medicare premiums are to be announced this month.
“Today’s COLA announcement lets them know there’s some relief around the corner,” the advocacy group’s president Max Richtman said in a prepared statement. “It may be cold comfort, however, once they see just how high next year’s Medicare premiums will go. While healthcare costs continue to erode seniors’ ability to keep up with inflation, Congress has yet to adopt a COLA formula that reflects the spending habits of seniors.”
The increase comes as a special joint congressional committee weighs budget cuts as part of a mandate to reduce the federal government’s budget deficit. President Obama and House Speaker John Boehner discussed a grand bargain over the summer to reduce the deficits, raise some revenue and make changes in entitlement programs such as Social Security and Medicare, but no bill was sent to Congress after some House Republicans objected.
The congressional committee is charged with coming up with $1.5 trillion in savings by Nov. 23. If it fails to reach a compromise or if Congress fails to pass the recommendations in December, it would trigger automatic cuts of $1.2 trillion.
The amount of wages subject to Social Security taxes will also go up next year, it was announced. The first $106,800 in wages is subject to Social Security payroll taxes this year, but that figure will rise to $110,100. 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 Social Security Administration said.