The Social Security Administration (SSA) confirmed that the 2013 COLA increase will be 1.7%. This means that nearly 62 million Americans will see their benefit payments increase in January 2013, with the average retiree receiving a $21 increase. As detailed in the table below, retired couples will see a $34 increase with disabled workers receiving a $19 increase on average. 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 2012, the COLA increase was 3.6%.
The maximum amount of earnings subject to the Social Security tax increased to $113,700 from $110,100. The employee component of the Social Security payroll tax rate is set to return to 6.20% (or 7.65% if you include Medicare tax contributions) in 2012 following expiry of the extended Tax Relief and Job Creation Act of 2012. Combining the COLA and tax increase the average worker will see their take home pay cut by $40 to $100 per month!
The earnings per quarter required to earn a social security credit will also increase by $30 to $1,160. You need to have 40 minimum earning quarters (10 years) to be eligible to receive social security. The maximum social security benefits rises to $2,533 in 2013.
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