The first increase for inflation since 2009 offsets a Medicare premium hike. By Mary Beth Franklin, Senior Editor November 29, 2011 Retirees breathed a sigh of relief when the Social Security Administration announced that benefits would increase 3.6% in 2012, the first cost-of-living adjustment in three years. For the average retiree, Social Security benefits will increase $43 a month, to $1,229. For most beneficiaries, that more than offsets a simultaneous increase of $3.50 in Medicare Part B premiums, for a total of $99.90 per month. Medicare Part B premiums cover doctor visits and outpatient care and are usually deducted from monthly Social Security benefits.Part B premiums will actually decline for some retirees who first enrolled in Medicare in 2010 and 2011. They, too, will pay $99.90 per month in 2012, down from the $110.50 or more they had paid each month since becoming eligible for benefits. But high-income beneficiaries -- individuals with modified adjusted gross income of more than $85,000 and married couples with joint income of more than $170,000 -- will continue to pay extra for Medicare coverage. The monthly Part B premium, including the surcharge, will range from $139.90 per person to $319.70 per person. High-income retirees will also pay more for Part D prescription-drug coverage, ranging from $11.60 to $66.40 per person per month on top of regular Part D premiums. Workers affected, too. High earners will pay more in payroll taxes in 2012. The maximum wage subject to the payroll taxes that fund Social Security increases to $110,100. That's up $3,300 from the $106,800 maximum taxable wage base that has been in effect since 2009. Top earners will pay an extra $138.60 in taxes if the current 2% payroll tax reduction is extended through 2012, as expected, or an extra $204.60 if it's not. Advertisement Retirees who continue to work will be able to earn a bit more in 2012 before they have to sacrifice some of their Social Security benefits. The earnings cap was increased $480, to $14,640 in 2012. Seniors who have not reached their normal retirement age must give back $1 in benefits for every $2 they earn over that limit.