Monthly Social Security benefit checks will be a little -- emphasis on “little” -- fatter next year.
The Social Security Administration has announced that Social Security and Supplemental Security Income (SSI) benefits for nearly 62 million recipients will increase 1.7 percent in 2013.
The cost-of-living adjustment (COLA) will begin with benefits that more than 56 million Social Security beneficiaries receive in January 2013. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2012.
Determining the COLA
The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation.
It's based on the percentage increase in the Consumer Price Index (CPI) from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA.
The 1.7 percent COLA increase works out to about $20 per month.
Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $113,700 from $110,100.
Of the estimated 163 million workers who will pay Social Security taxes in 2013, nearly 10 million will pay higher taxes as a result of the increase in the taxable maximum.
Information about Medicare changes for 2013 -- when announced -- will be available on the Medicare Website. Some Social Security beneficiaries may see their COLA partially or completely offset by increases in Medicare premiums.