[2017 COLA Confirmed] Despite fears that there would not be a Cost of Living Adjustment (COLA) increase in 2017, the Social Security Administration (SSA) announced that benefits will in fact increase by 0.3% in January 2017. Over 65 million Americans who receive Social Security benefits or Supplemental Security Income payments will benefit from this increase. This is following a year (2016) where no increase was provided. The table below shows recent COLA changes and associated updates.
Increase over previous year 0.3% 0% 1.7% 1.5% Maximum taxable earnings (wage base) subject to social security taxes $127,200 $118,500 $118,500 $117,000 Maximum social security benefit (per month) $2,687 $2,639/mo. $2,663/mo. $2,642/mo. Estimated average monthly social security benefit (all workers) $1,360 $1,341 $1,328 $1,294 Self-Employed social security tax rate 15.30% 15.30% 15.30% 15.30% Employee social security tax rate (deducted from your paycheck) 7.65% 7.65% 7.65% 7.65%
[2017 COLA Estimates] Estimates for the 2017 COLA range from flat (0%) to 0.7%, reflective of the low inflation environment that has persisted over this decade. You can see how this contrasts to COLA increases from prior years in the table below. Although inflation could pick up between now and the end of September (when COLA figures are finalized) the latest CPI-W is 0.3% lower than the average CPI-W for the base quarter, according to the Bureau of Labor Statistics.
The COLA increase is based on the percentage increase (if any) in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current year over the average for the third quarter of the previous year in which a COLA became effective. The government, via the BLS, publishes the official annual cost-of-living adjustments typically in late October, with changes to social security, retiree benefits and medicare effective for the subsequent year.
[2016 COLA update] As expected the 2016 Cost of living adjustment (COLA) was 0%, meaning that no changes to your social security taxes and benefits next year. Details over 2015 levels are shown in the table below.
*A decrease in full maximum benefits occurs when there is no COLA, but there is an increase in the national average wage index.
The Social Social Administration (SSA) announced a 1.7 percent cost of living adjustment (COLA) for 2015 (vs 1.5% in 2014). As a result the following changes, shown in the table above, to your social security taxes and income will result. All changes will take effect in January.
The main impact to tax payers will be an increase in earnings subject to the Social Security tax , which increase to $118,500 from $117,000 in 2014. The SSA estimates that this will impact 8% or 10 million off the approximately 165 million workers who will pay Social Security taxes.
The social security tax rate above is the combined rate for Social Security and Medicare. For employees the employer pays half the social security tax, whereas for self employed they have to pay both the employee and employer components and hence the higher tax rate.
Once a worker passes the maximum taxable earnings (or social security wage base) then all earnings above that amount are NOT subject to social security taxes.
Source: Social Security Administration (socialsecurity.gov)