In January, 2013, Social Security monthly payments will increase by 1.7%. The cost of living increase is low as a result of low inflation over the year. Last year the increase was 3.6%. This increase of only 1.7% is one of the smallest increases since automatic annual cost-of-living adjustment was adopted in 1975.
While any increase is certainly a benefit to Social Security recipients, it is expected that some of this increase will be wiped out by higher Medicare premiums. Although exact figures for the increase in the Medicare premium have not yet been released, it is expected that the premiums will increase from $99.90 per month to approximately $107.00.
Social Security is funded with 12.4% taxes on wages of employees, with that tax being split between the worker and the employer. The Social Security tax paid by workers had been temporarily cut from 6.2% to 4.2% for 2011 and 2012. This tax rate will revert back to 6.2% in 2013 unless there is some change by Congress. Social Security taxes were previously on wages of up to $110,100 and this amount will increase to wages of up to $113,700 in 2013, which will increases taxes for workers and employers.
* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.