Social Security Benefits to Rise 3.6% in 2012

Social Security

Social Security Benefits to Rise 3.6% in 2012

The first cost-of-living adjustment since 2009 could be offset by higher Medicare premiums.

It’s official: After back-to-back years of no cost-of-living adjustments, Social Security recipients will receive a 3.6% increase in benefits starting in January 2012. For the average retiree who received $1,177 per month this year, the increase will mean an extra $42 per month or a little more than $500 per year.

But bad news may not be far behind for some. If Medicare Part B premiums also rise in 2012, which is likely, the Social Security increase for some beneficiaries may be partially or completely offset by increases in Medicare premiums. An announcement on 2012 Medicare Part B premiums, which covers doctor visits and outpatient services, is expected soon.

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The maximum amount of earnings subject to Social Security taxes will increase next year from the current $106,800 to $110,100 in 2012. Of the 161 million workers who pay Social Security taxes, only about 10 million earn enough to be affected by the increase in the taxable maximum.


The earnings test for workers who collect Social Security benefits before their full retirement age -- currently 66 for those born in 1943 through 1954 -- will increase by $480 to $14,640 in 2012. Workers lose $1 in benefits for every $2 they earn over the cap. There is a more generous earnings cap during the year a worker turns 66 and it disappears completely once a worker reaches full retirement age.

AARP, a major lobbying group for the elderly, welcomed the news and used it as an opportunity to speak out against proposed changes to Social Security in the name of deficit reduction.

“This first increase in three years will provide much-need relief to millions and underscore the importance of Social Security as the only guaranteed lifelong and inflation-adjusted source of retirement income for most Americans," said AARP Executive Vice President Nancy LeaMond.