Social Security COLA Creeps Up
For the nearly 58 million people who receive Social Security benefits, an automatic cost-of-living adjustment (COLA) of 1.5 percent will kick in next year. Thanks to almost dormant consumer prices – which Social Security increases are pegged to – next year’s increase will be the smallest since automatic adjustments began in 1975. In simple terms, the annual COLA increase is intended to help those on a fixed income keep up with inflation.
Besides Social Security payments, the COLA increase also affects disabled veterans, federal retirees, and Supplemental Security Income recipients.
Changes are also coming to the way the Social Security tax is collected. Funds for payments are supported by a 12.4 percent tax on all wages earned by workers on the first $113,700. Employers pay half and half is deducted from paychecks. Starting next year, the upper limit for income subject to the tax increases to $117,000. Wages earned above that amount are not subject to the tax.
While any increase in COLA is welcome, the average check will only go up by about $19 per month. However, Social Security recipients are getting used to such numbers. Three of the past five years have seen increases of less than 2 percent. (Derek Dowell – VNN) (Image: Flickr | 401(k) 2013)