Social Security COLA Increase of 3.6 Percent for Senior Citizens in 2012
Cost-of-Living Adjustment is First Since 2009; see details, questions answered by Social Security
Oct. 19, 2011 -
After two years without a cost-of-living increase, Social Security will give senior citizens and others on Social Security a 3.6 percent
increase in 2012. The SS monthly payment for the average retired worker will go from $1,186 in 2011 to $1,229 in 2012 an increase of $43,
according to the announcement Wednesday.
Most senior citizens, however, will have to wait until next week, when Medicare announces the cost of Medicare Part B for
2012, to determine their net income from the COLA boost.
The 3.6 percent COLA will begin with benefits that nearly 55 million Social Security
beneficiaries receive in January 2012. Increased payments to more than 8 million SSI beneficiaries will begin on December 30, 2011.
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 $110,100 from $106,800.
Of the
estimated 161 million workers who will pay Social Security taxes in 2012, about 10 million will pay higher taxes as a result of the increase
in the taxable maximum.
Information about Medicare changes for 2012, when announced, will be available at
www.Medicare.gov.
For some beneficiaries, their Social Security increase may be partially or completely offset by increases in Medicare
premiums.
AP Finds Some Seniors Still Falling Behind
Advocates for seniors said the raise will
provide a much-needed boost to the millions of retirees and disabled people who have seen retirement accounts dwindle and home values
drop during the economic downturn. Economists say the increase should provide a modest boost to consumer spending, which should help
the economy.
Still, many seniors feel like they have been
falling behind.
Nancy Altman, co-chair of the Strengthen
Social Security Campaign, said she is pleased Social Security recipients will get a raise next year. But, she added, The COLA is
still not enough to keep up with health care costs.
"Despite the absence of a Social Security
COLA, over the last two years out-of-pocket health care costs rose 14.1 percent for seniors and people with disabilities, effectively
reducing the value of Social Security benefits," Altman said.
Frequently Asked Questions (Answers by Social Security Administration)
What is a cost-of-living adjustment (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 is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W) 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.
Who determines the CPI-W?
The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor. By law, it is the official measure
used by the Social Security Administration to calculate COLAs.
Why is the 2012 COLA the first automatic increase since 2009?
There was no COLA in 2010 and 2011 because the CPI-W, as determined by the Bureau of Labor Statistics in the Department
of Labor, for those years did not increase above the level of the third quarter of 2008, the last year a COLA was determined.
Will the maximum taxable earnings amount change in 2012?
Yes. Based on the increase in average wages, the maximum amount of earnings subject to the Social Security tax (taxable
maximum) will increase to $110,100 from $106,800.
Will the retirement earnings test exempt amounts change in 2012?
Yes. The earnings limit for workers who are younger than "full" retirement age (age 66 for people born in 1943 through
1954) will be $14,640. (We deduct $1 from benefits for each $2 earned over $14,640.)
The earnings limit for people turning 66 in 2012 will be $38,880. (We deduct $1 from benefits for each $3 earned over
$38,880 until the month the worker turns age 66.) There is no limit on earnings for workers who are "full" retirement age or older for the
entire year.
If Medicare premiums increase in 2012, how will that affect my Social Security benefits?
Information about Medicare changes for 2012, when announced, will be available at
www.Medicare.gov. For some beneficiaries, their Social Security increase may be partially or completely offset by increases in
Medicare premiums.
How long has Social Security had COLAs?
Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in
1975. Before that, benefits were increased only when Congress enacted special legislation.
2012 Social Security Changes - Details
Cost-of-Living Adjustment (COLA):
Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2008 through the third quarter of
2011, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 3.6 percent COLA for 2012. Other important 2012
Social Security information is as follows:
Tax Rate:
2011
2012
Employee
7.65%*
7.65%
Self-Employed
15.30%*
15.30%
NOTE: The 7.65% tax rate is the combined rate for Social Security and
Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below). The
Medicare portion (HI) is 1.45% on all earnings.
*
Section 601 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reduced, for wages and
salaries paid in calendar year 2011 and self-employment income in calendar year 2011, the OASDI payroll tax by 2 percentage
points, applied to the portion of the tax paid by the worker and the self-employed individual.
Maximum Taxable Earnings:
2011
2012
Social Security (OASDI only)
$106,800
$110,100
Medicare (HI only)
N
o L i m i t
Quarter of Coverage:
2011
2012
Earnings needed to earn one Social Security Credit
$1,120
$1,130
Retirement Earnings Test Exempt
Amounts:
2011
2012
Under full retirement age
NOTE:
One dollar in benefits will be withheld for every $2 in earnings above the limit.
$14,160/yr.
($1,180/mo.)
$14,640/yr.
($1,220/mo.)
The year an individual reaches full retirement age
NOTE: Applies only to earnings for months prior to attaining full
retirement age. One dollar in benefits will be withheld for every $3 in earnings above the limit.
There is no limit on earnings beginning the month an
individual attains full retirement age.
Oct. 19, 2011 -
After two years without a cost-of-living increase, Social Security will give senior citizens and others on Social Security a 3.6 percent
increase in 2012. The SS monthly payment for the average retired worker will go from $1,186 in 2011 to $1,229 in 2012 an increase of $43,
according to the announcement Wednesday.
