COLA Inflation Adjustments for 2012 Social Security and other Adjustments for 2012
Last week is was announced that social security benefits would be increased by 3.6% for 2012 due to cost of living adjustments (COLA). The increase will be seen in the January 2012 monthly checks. Other tax related adjustments were also announced. The new maximum for 401K savings accounts will be $17,000 for next year. The new maximum for social security payroll taxes will be $110,100. New limits for Roth IRAs was also announced.
The COLA, the first in a few years, increases the average monthly social security check amount to $1,229. The increase is not enough to effect the overall economy. The adjustments are automatic based on the inflation rate as recorded by the CPI-W. Some claim that these inflation amounts are inaccurately high thus overstating the real inflation. Others, like the AARP, think that the CPI-W is not representative enough of seniors spending and therefore understate the inflation that seniors are seeing. For now though, the CPI-W is as accurate as it gets and is what is used to calculate COLA each year.
The 3.6% increase also effects those receiving SSI disability payments. This effects around 10 million people.
The Social Security Tax for next year is still up in the air. President Obama would like the artificially lower 4.2% that workers paid this year to remain reduced next year or even be reduced farther to 3.1%. If Congress does nothing than the rate will increase back up to the normal rate of 6.2% for the worker’s half. There are many who question the effectiveness of these cuts helping the economy. They worry about the effects on Social Security benefits and solvency in the long run.
Related posts: