Are you receiving Social Security benefits? Learn the good and bad news about next year’s COLA.
Social Security benefits will increase by 1.7 percent in 2013, though increases in Medicare premiums may partially or fully offset the COLA, the Social Security Administration announced this morning.
The COLA, or cost-of-living adjustment, is based on the increase in the CPI-W, the Consumer Price Index for Urban Wage Earners, from the third quarter of 2011 through the third quarter of 2012, according to the SSA. Advocates claim the current COLA systems fails to protect the purchasing power of the 56 million Social Security beneficiaries and more than 8 million disabled Americans who receive Social Security Income.
The COLA increases the maximum monthly social security benefit to $2,533 from $2,513 for a worker retiring at full retirement age. The estimated average monthly benefit for all retired workers will increase to $1,261 from $1,240. The average elderly couple will see their combined monthly benefits go up to $2,048 from $2,014. A widowed mother with two children can expect an average monthly income of $2,592, up from $2,549, and an elderly widow or widower living alone will see their monthly benefits increase to $1,214 from $1,194, the SSA reports.
The tax threshold for retirement earnings has also been raised to $15,120 a year ($1,260 a month) from $14,640 a year ($1,220 a month).
Benefits increased by 3.6 percent in 2012, following two years of no COLA increase because the CPI-W remained unchanged. Advocacy groups claim that the current method for calculating the COLA understates inflation experienced by the elderly and disabled. Nancy Altman and Eric Kingston, co-chairs of the Strengthen Social Security Coalition, argue that the CPI-W fails to account for the disproportionate effect of healthcare spending on the part of the elderly and disabled. In 2009, Americans aged 65 and older spent 12.9 percent of their incomes on healthcare, while those ages 25 to 64 spent 3.5 percent. Healthcare costs are rising at a faster rate than that of general inflation, according to a statement from Altman and Kingston.
The 2013 COLA will increase monthly benefits for all disabled workers from $1,113 to $1,132, through households with a disabled worker, spouse, and one or more children will see average benefits increase from $1,887 to $1,919.