The Social Security Administration raised benefits for retired and disabled workers for the first time since 2009, providing a 3.6% increase to adjust for the cost of living.
Nearly 55 million Social Security beneficiaries saw an increase in benefits beginning December 30, 2011, when SSI benefits for January, 2012 were issued.
There was no cost of living adjustment (COLA) in 2010 or 2011 due to stagnant levels in the Consumer Price Index as compared to the 2008 level in those years. Consumer costs raised significantly enough in 2011 to trigger the increase for 2012 benefits.
In addition to raising the payable benefits for SSI recipients, the new changes will also impact the paychecks of U.S. workers. While the tax rate for Social Security remains the same at 6.20%, the total maximum subject to Social Security and Medicare taxes, known as OASDI, has been raised from $106,800 to $110,100. The SSA estimates that this will impact approximately 10 million workers who fall between this range out of the nation’s 161 million workforce.
Other changes in 2012 will impact the total amount the Social Security recipients who are working can earn before impacting their benefit status. This applies for disabled, retired and low-income workers, each of whom are allowed to work a small amount while still falling under their respective category within the SSA.
Social Security Deductions May Increase, Too
Under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which is designed to keep more money in the paycheck of middle-income workers, deductions of the OASDI were decreased by 2 percentage points from 7.65% to 5.65% throughout 2011.
The Temporary Payroll Tax Cut Continuation Act of 2011 continued these deductions through the end of February, 2012, but they may revert to their regular rate unless similar legislation is passed.
The higher deduction rate will see more money going into the Social Security system, but less in the pockets of workers.