Social Security benefits for more than 60 million Americans will increase by 1.7% in 2013, according to the Social Security Administration (SSA).
The cost-of-living adjustment (COLA) is based on how much the Consumer Price Index increased between the third quarter in 2011 and the third quarter of 2012.
“While this modest increase will help, much of the COLA will be consumed by health care and prescription costs, which continually outpace inflation. Every day, retirees and other beneficiaries struggling to make ends meet still feel like they’re falling further behind,” AARP Executive Vice President Nancy LeaMond said in a statement.
And based on the increase in average wages, the maximum amount of earnings subject to the Social Security tax will increase from $110,100 to $113,700 next year. In 2013, the maximum Social Security benefit for a worker retiring at full retirement age is $2,533 a month compared to $2,513 a month in 2012. The average benefit will be $1,260 a month.
“In this difficult economic environment, with many Americans expecting to depend even more heavily on Social Security in the future, it is unfortunate that some on Capitol Hill continue to suggest making the COLA even smaller by changing the way it is calculated,” LeaMond said. “Any proposal to decrease the COLA as part of a deficit reduction deal ignores the real struggles facing many seniors today, and would exacerbate their financial hardships with each passing year.”
According to the SSA, of the estimated 163 million workers who will pay Social Security taxes in 2013, nearly 10 million will pay higher taxes because of the increase in the taxable maximum. Still, the Social Security fund is all set to run out of funds in 2033.