Nearly 58 million retirees and disabled Americans will see their Social Security benefits rise by $19 this January; one of the smallest increases ever issued since the government adopted automatic cost of living adjustments (COLA) in 1975 so that benefits for people on fixed incomes would “keep pace with escalating prices. The adjustment however will do little for anyone, especially those facing high medical bills.
By law, the COLA adjustment is based on the consumer price index for urban wage earners and clerical workers, measuring consumer prices generated by the Bureau of Labor Statistics. This includes price changes for food, housing, clothing, transportation, energy, and medical care, as well as education.and recreation.
Social Security benefits are based on one’s lifetime earnings. The maximum payout, regardless of income, however, is $2,533. People receiving that amount will see a raise of $38. The average amount paid to retired workers, however, is somewhere around $1,272.
It should also be noted that the amount of wages subject to Social Security taxes is also going to rise next year. While Social Security is currently funded by a 12.4% tax on the first $113,700 earned in wages (half of which is witheld from workers’ paychecks and half paid by their employers), the wage threshold will increase to $117,000 in 2014. Anything above that will not be subject to Social Security taxes, according to the Social Security Administration.